Acct 2302 Exam 1 (Ch. 13 & 14).txt

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Acct 2302 Exam 1 (Ch. 13 & 14).txt
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Accounting 2302 Ch.13-14 Exam
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    • author "Catherine Mallory"
    • tags ""
    • folders "Accounting"
    • description ""
    • fileName "Acct 2302 Exam 1 (Ch. 13 & 14)"
    • The costs of bringing a corporation into existence, including legal fees, promoter fees, and amounts paid to obtain a charter are called:
    • A. Minimum legal capital.
    • B. Stock subscriptions.
    • C. Organization Costs.
    • D. Cumulative costs.
    • E. Prepaid fees.
    • C. Organization Costs.
  1. Buying stock in a corporation is attractive to investors because:
    A. Stockholders are not liable for the corporation's actions and debts.
    B. Stock is easily transferred.
    C. A corporation has unlimited life.
    D. Shareholters are not agents of the corporation.
    E. All of the above.
    E. All of the above.
  2. A proxy is:
    A. A legal document that gives a disignated agent of a stockholder the power to vote the stock.
    B. An arbitrary amount assigned to no-par stock by the corporation's board of directors.
    C. An amount of assets defined bby state law that stockholders must invest and leave invested in a corporation.
    D. The right of common stockholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional shares of common stock issued by the corporation.
    E. A contactual commitment by an investor to purchase unissued shares of stock.
    A. A legal document that gives a disignated agent of a stockholder the power to vote the stock.
    (this multiple choice question has been scrambled)
  3. The board of directors of a corporation:
    A. May not also be executive officers of the corporation, due to the separate entity principle.
    B. Are responsible for and have final authority for managing corporate activities.
    C. Are elected the corporate registrar.
    D. Are responsible for day-to-day operations of the business.
    E. Do not have the power to bind the corporation to contracts, due to lack of mutual agency.
    B. Are responsible for and have final authority for managing corporate activities.
    (this multiple choice question has been scrambled)
  4. The total amount of stock that a corporation's charter allows it to issue is referred to as:
    A. Issued stock.
    B. Outstanding stock.
    C. Common stock.
    D. Authorized stock.
    E. Perferred stock.
    D. Authorized stock.
    (this multiple choice question has been scrambled)
  5. Par value of a stock refers to the:
    A. Value assigned to a share of stock by the corporate charter.
    B. Maximum selling price of the stock.
    C. Issue price of the stock.
    D. Dividend value of the stock.
    E. Market value of the stock on the date of the financial statements.
    A. Value assigned to a share of stock by the corporate charter.
    (this multiple choice question has been scrambled)
  6. Stockholders' equity consists of:
    A. Contributed capital and retained earnings.
    B. Retained earnings and cash.
    C. Premiums and discounts.
    D. Long-term assets.
    E. Contributed capital and par value.
    A. Contributed capital and retained earnings.
    (this multiple choice question has been scrambled)
  7. A class of stock that does not have a par value, and can usuallybe issued at any price without creating a minimum legal captial deficiency, is called:
    A. Convertible stock.
    B. No-par stock.
    C. Noncumulative stock.
    D. Discounted stock.
    E. Callable stock.
    B. No-par stock.
    (this multiple choice question has been scrambled)
  8. Owners of preferred stock often do not have:
    A. Ownership rights to assets of the corporation.
    B. Preference to dividends.
    C. Voting rights.
    D. The right to sell their stock on the open market.
    E. Preference to assets at liquidation.
    C. Voting rights.
    (this multiple choice question has been scrambled)
  9. Preferred stock on which the right to receive dividends it forfeited for any year that the dividends are not declared is referred to as:
    A. Callable preferred stock.
    B. Convertible preferred stock.
    C. Participation preferred stock.
    D. Cumulative preferred stock.
    E. Noncumulative prferred stock.
    E. Noncumulative prferred stock.
    (this multiple choice question has been scrambled)
  10. A company issued 7% preferred stock with a $100 par value. This means that:
    A. The market price per share will approximate $100 per share.
    B. Preferred shareholders are entitled to 7% of the annual income.
    C. Only 7% of the total contributed capital can be preferred stock.
    D. Preferred shareholders have a guaranteed dividend.
    E. The amount of the potential dividend is $7 per year per perferred share.
    E. The amount of the potential dividend is $7 per year per perferred share.
    (this multiple choice question has been scrambled)
  11. Retained earnings:
    A. Are never adjusted for anything other than net income or dividends.
    B. Represent an amount of cash available to pay shareholders.
    C. Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.
    D. Can only be appropriated by setting aside a cash fund.
    E. All of the above.
    C. Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.
    (this multiple choice question has been scrambled)
  12. Prior period adjustments to financial statements can result from:
    A. Changes in tax law.
    B. Using unacceptable accounting principles.
    C. Extraordinary items.
    D. Changes in estimates.
    E. Discontinued operations.
    B. Using unacceptable accounting principles.
    (this multiple choice question has been scrambled)
  13. A premium on common stock:
    A. Is the difference between par value and issue price when the amount paid is below par.
    B. Is prohibited in most states.
    C. Represents profit from issuing stock.
    D. Represents capital gain on sale of stock.
    E. Is the amount paid in excess of par by purchasers of newly issued stock.
    E. Is the amount paid in excess of par by purchasers of newly issued stock.
    (this multiple choice question has been scrambled)
  14. The date a board of directors votes to pay a dividend is called the:
    A. Liquidating date.
    B. Date of record.
    C. Date of declaration.
    D. Date of payment.
    E. Date of stockholders' meeting.
    C. Date of declaration.
    (this multiple choice question has been scrambled)
  15. A corporation's distribution of additional shares of its own stock to its stockholders without the recipt of any payment in return is called a:
    A. Stock subscription.
    B. Discount on Stock.
    C. Treasury Stock.
    D. Premium on stock.
    E. Stock dividend.
    E. Stock dividend.
    (this multiple choice question has been scrambled)
  16. Corporations often buy back their own stock:
    A. To avoid a hostile take-over.
    B. To have shares available for a merger or acquisition.
    C. To have shares available for employee compensation.
    D. To maintain market value for the company stock.
    E. All of the above.
    E. All of the above.
  17. Stock that was reacquired and is still held by the issuing corporation is called:
    A. Capital stock.
    B. Callable stock.
    C. Redeemed stock.
    D. Preferred stock.
    E. Treasury stock.
    E. Treasury stock.
    (this multiple choice question has been scrambled)
  18. Treasury stock is classified as:
    A. An asset account.
    B. A revenue account.
    C. A liablity account.
    D. A contra asset account.
    E. A contra equity account.
    E. A contra equity account.
    (this multiple choice question has been scrambled)
  19. The following data were reported by a corporation:
    Authorized shares: 20,000
    Issued Shares: 15,000
    Treasury Shares: 3,000

    The number of outstanding shares is:
    A. 23,000.
    B. 15,000.
    C. 12,000.
    D. 20,000.
    E. 17,000.
    C. 12,000.
    (this multiple choice question has been scrambled)
  20. Sinking fund bonds:
    A. Required the issuer to set aside assets to retire the bonds at maturity.
    B. Required equal payments of both principal and interest over the life of the bond issue.
    C. Decline in value over time.
    D. Are registered bonds.
    E. Are bearer bonds.
    A. Required the issuer to set aside assets to retire the bonds at maturity.
    (this multiple choice question has been scrambled)
  21. Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are know as:
    A. Sinking fund bonds.
    B. Serial bonds.
    C. Convertible bonds.
    D. Junk bonds.
    E. Callable bonds.
    E. Callable bonds.
    (this multiple choice question has been scrambled)
  22. A bond traded at 102 1/2 means that:
    A. The bond traded at $1,025 per $1,000 bond.
    B. The bond were retired at $1,025 each.
    C. The bond pays 2.5% interest.
    D. The market rate of interest is 2.5%.
    E. The market rate of interest is 2 1/2% above the contract rate.
    A. The bond traded at $1,025 per $1,000 bond.
    (this multiple choice question has been scrambled)
  23. Secured bonds:
    A. Are the same as sinking fund bonds.
    B. Are backed by the issuer's bank.
    C. Are called debentures.
    D. Are subordinated to those of other unsecured liabilities.
    E. Have specific assets of the issuing company pledged as collateral.
    E. Have specific assets of the issuing company pledged as collateral.
    (this multiple choice question has been scrambled)
  24. An advantage of bond financing is:
    A. Bonds do not affects owners' control.
    B. Interest on bonds is tax deductible.
    C. Bonds can increase return on equity.
    D. It allows firms to trade on the equity.
    E. All of the above.
    E. All of the above.
  25. A disadvantage of bonds is:
    A. Bonds require payment of periodic interest.
    B. Bonds require payment of principal.
    C. Bonds can decrease return on equity.
    D. Bond payments can be burdensome when income and cash flow are low.
    E. All of the above.
    E. All of the above.
  26. The party that has the right to exercise the call option on callable bonds is(are):
    A. The bondholders.
    B. The bond trustee.
    C. The bond underwriter.
    D. The bond indenture.
    E. The bond issuer.
    E. The bond issuer.
    (this multiple choice question has been scrambled)
  27. The contract rate of interest is also called the:
    A. Stated rate.
    B. Each of A, B, and C.
    C. Nominal rate.
    D. Market rate.
    E. Coupon rate.
    B. Each of A, B, and C.
    (this multiple choice question has been scrambled)
  28. Bonds can be issued:
    A. At par.
    B. At a premium.
    C. At a discount.
    D. Between interest payment dates.
    E. All of the above.
    E. All of the above.
  29. When a bond sells at a premium:
    A. The contract rate is above the market rate.
    B. The contract rate is equal to the market rate.
    C. It means that the bond is a zero coupon bond.
    D. The bond pays no interest.
    E. The contract rate is below the market rate.
    A. The contract rate is above the market rate.
    (this multiple choice question has been scrambled)
  30. A bond sells at a discount when the:
    A. Contract rate is below the market rate.
    B. Bond has a short-term life.
    C. Bond pays interest only once a year.
    D. Contract rate is above the market rate.
    E. Contract rate is equal to the market rate.
    A. Contract rate is below the market rate.
    (this multiple choice question has been scrambled)
  31. Amortizing a bond discount:
    A. Decreases interest expense each period.
    B. Increases cash flows from the bond.
    C. Decreases the Bond Payable account.
    D. Increases the market value of the Bonds Payable.
    E. Allocates a part of the total discount to each interest period.
    E. Allocates a part of the total discount to each interest period.
    (this multiple choice question has been scrambled)
  32. The Discount on Bond Payable account is:
    A. A contra equity.
    B. An expense.
    C. A contra liablility.
    D. A contra expense.
    E. A liablility.
    C. A contra liablility.
    (this multiple choice question has been scrambled)
  33. A discount on bonds payable:
    A. Is not allowed in many states to protect creditors.
    B. Decreases the total bond interest expense.
    C. Occurs when a company issues bonds with a contract rate less than the market rate.
    D. Occurs when a company issues bonds with a contract rate more than the market rate.
    E. Increases the Bond Payable account.
    C. Occurs when a company issues bonds with a contract rate less than the market rate.
    (this multiple choice question has been scrambled)
  34. A company may not retire bonds by:
    A. Exercising a call option.
    B. The holders converting them to stock.
    C. Purchasing the bonds on the open market.
    D. Paying them off at maturity.
    E. All of the above.
    E. All of the above.
  35. Bonds that give the issuer and option of retiring them before they mature are:
    A. Debentures.
    B. Sinking fund bonds.
    C. Callable bonds.
    D. Registered bonds.
    E. Serial bonds
    C. Callable bonds.
    (this multiple choice question has been scrambled)
  36. Bonds with a par value of less than $1,000 are known as:
    A. Unsecured bonds.
    B. Baby bonds.
    C. Convertible bonds.
    D. Callable bonds.
    E. Junk bonds.
    B. Baby bonds.
    (this multiple choice question has been scrambled)
  37. To provide security to creditors and to reduct interest cost, bonds and notes payable can be secured by:
    A. Morgages.
    B. Safe deposit boxes.
    C. Equity.
    D. The FASB.
    E. Debentures.
    A. Morgages.
    (this multiple choice question has been scrambled)
  38. The Contract between the bond issuer and the bondholders, which identifies the rights and obligations of the parties, is called a(n):
    A. Bond indenture.
    B. Mortgage.
    C. Installment note.
    D. Debenture.
    E. Mortgage contract.
    A. Bond indenture.
    (this multiple choice question has been scrambled)
  39. A company must repay the bank $10,000 cash in 3 years for a loan it entered into. The lean is at 8% interest compounded annually. The persent value factor for 3 years at 8% is 0.7938. The percent value of the loan is:
    A. $10,000.
    B. $12,400.
    C. $7,600.
    D. $7,938.
    E. $9,200.
    D. $7,938.
    (this multiple choice question has been scrambled)

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