Financial And Managerial Accounting 18th Edition By Jan Williams – Test Bank

Chapter 11 Stockholders’ Equity: Paid-in Capital

1) A corporation is a legal entity separate from its owners; it may sue and be sued, but it may not own property in its own name.

Answer: FALSE
Difficulty: 1 Easy
Topic: Corporations
Learning Objecti: 11-01 Explain the advantages and disadvantages of organizing a business as a corporation.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

2) A corporation continues in existence even if a stockholder dies or withdraws from the organization.

Answer: TRUE
Difficulty: 1 Easy
Topic: Corporations
Learning Objecti: 11-01 Explain the advantages and disadvantages of organizing a business as a corporation.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

3) Stockholders of a corporation are personally liable for the debts of the corporation if all shares of stock are owned by the officers of the corporation.

Answer: FALSE
Difficulty: 1 Easy
Topic: Corporations
Learning Objecti: 11-01 Explain the advantages and disadvantages of organizing a business as a corporation.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

4) It is illegal for the government to tax corporate earnings twice.

Answer: FALSE
Difficulty: 1 Easy
Topic: Corporations
Learning Objecti: 11-01 Explain the advantages and disadvantages of organizing a business as a corporation.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

5) Stockholders in a corporation elect the board of directors, pass the bylaws of the corporation, and hire top corporate officers and managers.

Answer: FALSE
Difficulty: 1 Easy
Topic: Publicly Owned Corporations
Learning Objecti: 11-02 Distinguish between publicly owned and closely held corporations.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

6) The costs to organize a corporation (organization costs) are reported as an intangible asset in the balance sheet and amortized to expense over the 5-year life used by the IRS.

Answer: FALSE
Difficulty: 1 Easy
Topic: Publicly Owned Corporations
Learning Objecti: 11-02 Distinguish between publicly owned and closely held corporations.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

7) When a stockholder sends in a proxy statement to a corporation he or she owns stock in, they grant management the voting rights associated with their shares.

Answer: TRUE
Difficulty: 1 Easy
Topic: Rights of Stockholders
Learning Objecti: 11-03 Explain the rights of stockholders and the roles of corporate directors and officers.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

8) A stockholders’ subsidiary ledger will have entries made for each stockholder showing the number of shares held.

Answer: TRUE
Difficulty: 1 Easy
Topic: Rights of Stockholders
Learning Objecti: 11-03 Explain the rights of stockholders and the roles of corporate directors and officers.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

9) The board of directors is at the top of a corporate organization chart, followed by the stockholders, then the CEO or president of the corporation.

Answer: FALSE
Difficulty: 2 Medium
Topic: Rights of Stockholders
Learning Objecti: 11-03 Explain the rights of stockholders and the roles of corporate directors and officers.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

10) The number of shares a corporation may issue is specified in the articles of incorporation and approved by the Securities and Exchange Commission.

Answer: FALSE
Difficulty: 2 Medium
Topic: Paid-In Capital of a Corporation
Learning Objecti: 11-04 Account for paid-in capital and prepare the equity section of a corporate balance sheet.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation