COMPREHENSIVE EXAMINATION -CORPORATION ACCOUNTING
MULTIPLE CHOICE - Conceptual
The first twenty number should be answered using the following:
A. Only the first statement is true.
B. Only the second statement is true.
C. Both statements are true.
D. Both statements are false.
1. A corporation is a separate entity for accounting purposes but not for legal purposes. F
The financial loss that each shareholder can incur is usually limited to the investment made by
the shareholder. T
2. The initial owners of stock of a newly formed corporation are called directors. F
By-laws are part of the articles of incorporation. F
3. Organizational expenses are classified as intangible assets on the Statement of Financial
Position. F
Retained earnings represents past net incomes less past dividends, the balance of this account
is presented in the income statement. F
4. The number of outstanding shares of stock is equal to the number of shares authorized minus
the number of shares issued. F
The amount of capital paid in by the shareholders is called legal capital. F
5. A corporation acts under its own name rather than in the name of its shareholders. T
A shareholder has the right to vote in the election of the board of directors. T
6. As soon as a corporation is authorized to sell stock, under the journal entry method, an entry
should be made recording the total value of the shares authorized. T
When no-par value stock does not have a stated value, the entire proceeds from the issuance of
the stock becomes legal capital. T
7. Each shareholder has a separate capital account in the shareholders' equity section of the
Statement of Financial Position. F
The number of ordinary shares outstanding can never be greater than the number of shares
issued. T
, 8. If the dividend amount of preferred stock, P50 par value, is quoted as 8%, then the dividends
per share would be P4. T
Preferred stock with a preferential right to dividends in arrears is referred to as participating
preference share. F
9. Although preferred shareholders have a greater chance of receiving a regular dividend,
common shareholders have a greater chance of receiving large dividends. T
When the Board of Directors declares a cash or stock dividend, this action decreases assets
and retained earnings. F
10. A corporation is a legal entity separate from its owners. T
Corporations are subject to substantially fewer regulations and laws than are proprietorships
and partnerships. F
11. Organizational expenses of a corporation often include legal fees and promoter fees. T
Ordinary shareholders always share equally with all other shareholders in all dividends. F
12. Shares of stock are attractive to investors because these are easily transferable and
shareholders are not liable for the corporation's actions and debts. T
The price at which a share of stock is bought or sold is called par value. F
13. Paid-in capital is the total amount of cash and other assets the corporation receives from its
stockholders in exchange for common stock. T
Authorized stock is the total number of shares outstanding. F
14. If a corporation is authorized to issue 1,000 shares of P50 ordinary stock, it is said to have
P50,000 of stock outstanding. F
Minimum legal capital requirements are intended to protect creditors by requiring a minimum
level of net assets. T
15. Stated value stock is par stock that is assigned a value per share by the corporation's Board
of Directors. F
A corporation can issue two kinds of stock – ordinary and preferred. T
16. Special rights often granted to preference shares include a preference for receiving dividends
and for the distribution of assets if the corporation is liquidated. T
Another key preference rights for preferred stock is the right to vote. F
17. Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid
dividends before any dividends are paid to ordinary shareholders. T
Retained earnings generally consist of a company's cumulative net income less any net losses
and dividends declared since its inception. T
MULTIPLE CHOICE - Conceptual
The first twenty number should be answered using the following:
A. Only the first statement is true.
B. Only the second statement is true.
C. Both statements are true.
D. Both statements are false.
1. A corporation is a separate entity for accounting purposes but not for legal purposes. F
The financial loss that each shareholder can incur is usually limited to the investment made by
the shareholder. T
2. The initial owners of stock of a newly formed corporation are called directors. F
By-laws are part of the articles of incorporation. F
3. Organizational expenses are classified as intangible assets on the Statement of Financial
Position. F
Retained earnings represents past net incomes less past dividends, the balance of this account
is presented in the income statement. F
4. The number of outstanding shares of stock is equal to the number of shares authorized minus
the number of shares issued. F
The amount of capital paid in by the shareholders is called legal capital. F
5. A corporation acts under its own name rather than in the name of its shareholders. T
A shareholder has the right to vote in the election of the board of directors. T
6. As soon as a corporation is authorized to sell stock, under the journal entry method, an entry
should be made recording the total value of the shares authorized. T
When no-par value stock does not have a stated value, the entire proceeds from the issuance of
the stock becomes legal capital. T
7. Each shareholder has a separate capital account in the shareholders' equity section of the
Statement of Financial Position. F
The number of ordinary shares outstanding can never be greater than the number of shares
issued. T
, 8. If the dividend amount of preferred stock, P50 par value, is quoted as 8%, then the dividends
per share would be P4. T
Preferred stock with a preferential right to dividends in arrears is referred to as participating
preference share. F
9. Although preferred shareholders have a greater chance of receiving a regular dividend,
common shareholders have a greater chance of receiving large dividends. T
When the Board of Directors declares a cash or stock dividend, this action decreases assets
and retained earnings. F
10. A corporation is a legal entity separate from its owners. T
Corporations are subject to substantially fewer regulations and laws than are proprietorships
and partnerships. F
11. Organizational expenses of a corporation often include legal fees and promoter fees. T
Ordinary shareholders always share equally with all other shareholders in all dividends. F
12. Shares of stock are attractive to investors because these are easily transferable and
shareholders are not liable for the corporation's actions and debts. T
The price at which a share of stock is bought or sold is called par value. F
13. Paid-in capital is the total amount of cash and other assets the corporation receives from its
stockholders in exchange for common stock. T
Authorized stock is the total number of shares outstanding. F
14. If a corporation is authorized to issue 1,000 shares of P50 ordinary stock, it is said to have
P50,000 of stock outstanding. F
Minimum legal capital requirements are intended to protect creditors by requiring a minimum
level of net assets. T
15. Stated value stock is par stock that is assigned a value per share by the corporation's Board
of Directors. F
A corporation can issue two kinds of stock – ordinary and preferred. T
16. Special rights often granted to preference shares include a preference for receiving dividends
and for the distribution of assets if the corporation is liquidated. T
Another key preference rights for preferred stock is the right to vote. F
17. Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid
dividends before any dividends are paid to ordinary shareholders. T
Retained earnings generally consist of a company's cumulative net income less any net losses
and dividends declared since its inception. T
