Question:Question 1

Dividends in arrears should be classified as a liability until such time as they are formally declared.

Question 1 options:

True

False

Question 2

Treasury stock transactions typical produce losses in the income statement, but not gains.

Question 2 options:

True

False

Question 3

Preferred stock has a “preference” ahead of common stock for both dividends and liquidation proceeds.

Question 3 options:

True

False

Ch14 – Multiple Choice

Question 4

Which of the following statements is true?

Question 4 options:

One purpose of a corporation is to avoid “double taxation.”

A corporation can issue common or preferred stock, but not both.

Preemptive rights make it easy for a corporation to issue additional shares.

A corporate entity is typically of unlimited duration.

Question 5

Preferred stocks typically:

Question 5 options:

receive regular interest payments.

None of the options presented.

are used to avoid “double-taxation.”

possess voting rights.

participate in earnings.

Question 6

Which of the following is not a characteristic of the corporate form of organization?

Question 6 options:

Shares of stock in a corporation are readily transferable.

The owners of a corporation cannot lose more than the amount of their investment.

The corporation is an effective vehicle for obtaining large amounts of capital.

Stockholders decide by majority vote the amount of dividends to be paid.

Ch15 – True & False

Question 7

The carrying amount of inventory purchased on account from a foreign supplier will be adjusted for changes in the exchange rate that occur between the date of purchase and payment.

Question 7 options:

True

False

Question 8

Errors affecting the net income of previous periods are corrected by the use of prior period appropriations.

Question 8 options:

True

False

Question 9

In the absence of preferred stock, income equals earnings available to the common stockholder (for purposes of calculating earnings per share).

Question 9 options:

True

False

Question 10

Which formula “calculates” the return on assets ratio?

Question 10 options:

(Net Income + Discontinued Operations)/Average Assets

Net Income/Average Total Assets.

(Net Income + Income Tax Expense)/Average Assets.

Income from Continuing Operations/Average Assets

Question 11

Mr. Bravo desired to borrow money to expand his business. In his loan application he included financial statements that combined his personal assets with the assets and liabilities of the business. This violates which of the following assumptions?

Question 11 options:

Going concern assumption

Periodicity assumption

Monetary unit assumption

Entity assumption

Question 12

The Financial Accounting Standards Board:

Question 12 options:

replaced the IASB.

has been replaced by the Accounting Principles Board.

is a branch of government.

None of the options presented.