Financial Accounting Information For Decisions 9th Edition By John – Test Bank

Chapter 11 Reporting and Analyzing Equity

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

Answer: TRUE
Difficulty: 1 Easy
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Legal; FN Reporting

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

Answer: FALSE
Difficulty: 1 Easy
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Legal; FN Reporting

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

Answer: TRUE
Difficulty: 2 Medium
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Understand
AACSB: Communication
AICPA: BB Legal; FN Reporting

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

Answer: FALSE
Difficulty: 2 Medium
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Understand
AACSB: Communication
AICPA: BB Legal; FN Decision Making

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

Answer: TRUE
Difficulty: 1 Easy
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Legal; FN Decision Making

6) Common shareholders always share equally with all other shareholders in dividends.

Answer: FALSE
Difficulty: 2 Medium
Topic: Issuance of Preferred Stock
Learning Objective: 11-C2 Explain characteristics of, and distribute dividends between, common and preferred stock.
Bloom’s: Understand
AACSB: Communication
AICPA: BB Legal; FN Measurement

7) A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.

Answer: TRUE
Difficulty: 1 Easy
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Legal; FN Decision Making

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
Difficulty: 1 Easy
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Legal; FN Decision Making

9) A registrar keeps stockholder records and prepares official lists of stockholders and dividend payments.

Answer: TRUE
Difficulty: 1 Easy
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Legal; FN Reporting

10) Stockholders’ equity consists of paid-in capital and retained earnings.

Answer: TRUE
Difficulty: 1 Easy
Topic: Corporate Form of Organization
Learning Objective: 11-C1 Identify characteristics of corporations and their organization.
Bloom’s: Remember
AACSB: Communication
AICPA: BB Legal; FN Reporting