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?
$40,000
$32,000
$ 400
$ 4,500
None of these is correct
2. Which of the following is a TRUE statement about a corporation?
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.
True
False
4. Which of the following is an advantage of preferred stock?
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.
True
False
6. A corporation is a separate legal entity formed under the laws of a particular state.
True
False
7. Cash dividends affect only stockholders' equity accounts.
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.
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?
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.
True
False