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.

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

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.

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.

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