1. Which of the following is not a distinguishing characteristic of the corporation as a form of business?
a. Separate legal entity
b. Unlimited liability of owners
c. Ability to raise capital
d. Double taxation
2. The income of the corporation is taxed:
a. at the personal level when dividends are paid.
b. at the corporate level.
c. both a and b.
d. neither a nor b.
3. The number of shares that a company can issue according to its corporate charter is referred to as:
a. issued shares.
b. authorized shares.
c. outstanding shares.
d. none of the above.
4. Which of the following rights are received by investors when they purchase common stock?
a. The right to participate proportionally in dividends
b. The right to vote
c. The right of preemption
d. All of the above
5. What is the arbitrary value that determines an entity's legal capital?
a. Issue value
b. Face value
c. Par value
d. Stated value
6. A company issues 200 shares of $2 par value common stock for $10 per share. What amount will be credited to the Common Stock account when recording this transaction?
a. $400
b. $2,000
c. $1,600
d. None of the above
7. A company issues 200 shares of $2 par value common stock for $10 per share. What amount will be credited to the Additional Paid-In Capital account when recording this transaction?
a. $400
b. $1,600
c. $2,000
d. None of the above
8. A distribution of profits to owners by a corporation is known as:
a. a gift.
b. a settlement.
c. a payment.
d. a dividend.
9. Which of the following statements concerning dividends is true?
a. The board of directors decides when to distribute dividends
b. A corporation does not have to pay a dividend every year
c. Dividends can be paid in methods other than cash
d. All of the above are true