Financial And Managerial Accounting 7th Edition By Wild – Test Bank

Chapter 11
CORPORATE REPORTING AND ANALYSIS

True /False Questions

1. A corporation is a legal entity separate from its owners.

Answer: True

Blooms: Remember
AACSB: Communication
AICPA BB: Legal
AICPA FN: Reporting
Difficulty: 1 Easy
Learning Objective: 11-C1
Topic: Characteristics of Corporations

2. Corporations avoid many of the state regulations and controls that proprietorships and partnerships are subject to.

Answer: False

Blooms: Remember
AACSB: Communication
AICPA BB: Legal
AICPA FN: Reporting
Difficulty: 1 Easy
Learning Objective: 11-C1
Topic: Characteristics of Corporations

3. Organization expenses of a corporation often include legal fees and promoter fees.

Answer: True

Blooms: Understand
AACSB: Communication
AICPA BB: Legal
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 11-C1
Topic: Characteristics of Corporations

4. Shareholders in a corporation have the power to bind the corporation to contracts.

Answer: False

Blooms: Understand
AACSB: Communication
AICPA BB: Legal
AICPA FN: Decision Making
Difficulty: 2 Medium
Learning Objective: 11-C1
Topic: Characteristics of Corporations

5. A proxy is a document that gives a designated agent the right to vote a shareholder’s stock.

Answer: True

Blooms: Remember
AACSB: Communication
AICPA BB: Legal
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 11-C1
Topic: Characteristics of Corporations

6. Common shareholders always share equally with all other shareholders in dividends.
Answer: False
Blooms: Understand
AACSB: Communication
AICPA BB: Legal
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 11-C2
Topic: Issuance of Preferred Stock

7. A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Legal
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 11-C1
Topic: Characteristics of Corporations

8. Stock is attractive to investors because stockholders are not liable for the corporation’s actions and debts and because stock is easily transferred.

Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Legal
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 11-C1
Topic: Characteristics of Corporations

9. A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Legal
AICPA FN: Reporting
Difficulty: 1 Easy
Learning Objective: 11-C1
Topic: Characteristics of Corporations

10. Stockholders’ equity consists of paid-in capital and retained earnings.
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Legal
AICPA FN: Reporting
Difficulty: 1 Easy
Learning Objective: 11-C1
Topic: Characteristics of Corporations