1. Occidental Produce Company

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? (Points : 1)

$40,000

$32,000

$ 400

$ 4,500

None of these is correct

2. Which of the following is a TRUE statement about a corporation? (Points : 1)

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. (Points : 1)

True

False

4. Which of the following is an advantage of preferred stock? (Points : 1)

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. (Points : 1)

True

False

6. A corporation is a separate legal entity formed under the laws of a particular state. (Points : 1)

True

False

7. Cash dividends affect only stockholders’ equity accounts. (Points : 1)

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 par 260,000

Retained earnings 940,000

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. (Points : 1)

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 par 260,000

Retained earnings 940,000

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? (Points : 1)

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. (Points : 1)

True

False