INTRODUCTION TO CORPORATIONS

CHAPTER 15

Course: Intermediate Financial Accounting

Submitted by: Syeda Abeera Ahmed

Multiple choice questions

1. Corporations are ____ from its owners

a) Similar
b) Separate
c) Diversified
d) Connected
2. The following is the advantage of corporation
a) Heavy regulation
b) Ease of raising capital
c) Partnership
d) Unlimited liability
3. The owners of corporation are termed its
a) Stockholders
b) Debtor
c) Creditor
d) Partner
4. In corporation, owner has ___ liability
a) Limited liability
b) Unlimited liability
c) Limited credit
d) Unlimited credit
5. Taxes on income are often amount to
a) 30%
b) 65%
c) 40%
d) 20%
6. The controller is the ____ of the firm and is responsible for internal and external reporting
a) Chief executive officer
b) Chief operating officer
c) Chief of director
d) Chief accounting officer
7. Organization cost are mentioned as ___ on balance sheet
a) Tangible asset
b) Intangible asset
c) Fixed asset
d) Current asset
8. When intangible asset cost is used up for the period of time it is called
a) Depreciation
b) Amortization
c) Devaluation
d) Reduction
9. All corporations issue
a) Common stock
b) Authorized stock
c) Preferred stock
d) Dividends
10. Which statement is true
a) Preferred stock holder have no voting rights in corporate affair
b) Preferred stock holder have all the voting rights in corporate affair
c) Preferred stock holder can make exceptions in voting rights in corporate affair
d) Preferred stock holders cannot be part of corporate affair
11. A stockholder who owns __ of common stock can purchase 15% of any new shares issued before other
investors
a) 20%
b) 15%
c) 50%
d) 35%
12. What is the nature of preferred stock
a) Have voting rights
b) Remaining cash is shared proportionately
c) Convertible
d) Inconvertible
13. ____ has the fixed dollar amount per share specified by the corporate charter
a) Par-value stock
b) Preferred stock
c) Common stock
d) Authorized stock
14. Which statement is correct
a) All corporation issue stock below par
b) All corporation issue stock at par
c) All corporation issue stock above par
d) All corporation issue stock at or above par
15. What does retained earnings represent in balance sheet
a) Profit earned
b) Capital generated
c) Cash generated
d) Cash flow
16. Which of the statement is false
a) All corporations issue preferred stock
b) Stockholders have limited liability
c) Corporate earnings are subject to double taxation
d) Corporations face heavier government regulations than sole proprietorship
17. XYZ Corporation is authorized to issue 10,000 shares of $5 par-value common stock. If 60% of these share
are issued at 20$, what amount should be credited to the common stock account?
a) $50,000
b) $30,000
c) $90,000
d) $120,000
Evaluate the following as being true or false:
18. Common stock holders are likely to be rewarded with increase in the market value of their shares as a
corporation becomes more profitable
a) True
b) False
19. par-value stock is generally worth more than no par-stock
a) True
b) False
20. Corporations are subject to double taxation. Thus a 40% tax rate on income becomes an effective tax rate of
80% to the corporation.
a) True

b) False