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1. Occidental Produce Company has 40,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $0.01 par value; the preferred stock is 4% non-cumulative, with $100 par value. On October 15, 2014, the company declares a total dividend payment of $40,000. What is the total amount of dividends that will be paid to the common shareholders? (Points : 1)
$40,000
$32,000
$ 400
$ 4,500
None of these is correct
2. Which of the following is a TRUE statement about a corporation? (Points : 1)
The owners of a corporation have co-ownership of the property of the corporation.
A corporation is not taxed on the corporation’s business income.
A corporation has a limited life.
The owners of a corporation have limited liability for the corporation’s debts.
3. The purchase of treasury stock requires a credit to the Common stock account. (Points : 1)
True
False
4. Which of the following is an advantage of preferred stock? (Points : 1)
Preferred shareholders are guaranteed that they will not take a loss on their investment.
Preferred shareholders have higher voting rights than common shareholders.
Preferred shareholders may sell their shares for a price higher than that of common stock.
Preferred shareholders have the first claim on dividend funds.
5. All forms and classes of stock carry voting rights. (Points : 1)
True False
6. A corporation is a separate legal entity formed under the laws of a particular state. (Points : 1)
True False
7. Cash dividends affect only stockholders’ equity accounts. (Points : 1)
True False
8. On June 30, 2014, Stephans Company showed the following data on the equity section of their balance sheet:
Stockholders’ equity
Common stock, $1 par100,000 shares authorized$40,000
40,000 shares issued
Paid-in capital in excess of par260,000
Retained earnings940,000
Total stockholder’s equity$1,240,000
On July 1, 2014, Stephans distributed a 5% stock dividend. The market value of the stock at that time was $13 per share. Following this transaction, the total shareholders’ equity would go down by $26,000. (Points : 1)
True False
9. On June 30, 2013, Stephans Company showed the following data on the equity section of their balance sheet:
Stockholders’ equity Common stock, $1 par100,000 shares authorized$40,000 40,000 shares issued Paid-in capital in excess of par260,000 Retained earnings940,000 Total stockholder’s equity$1,240,000
On July 1, 2013, Stephans distributed a 5% stock dividend. The market value of the stock at that time was $13 per share. Following this transaction, what would be the new number of shares issued shown on the balance sheet? (Points : 1)
26,000
66,000
42,000
105,000
None of these is correct
10. If preferred stock is non-cumulative, then the company does NOT need to pay dividends that were passed in previous years. (Points : 1)
True False
