Page 510 - Accounting Principles (A Business Perspective)

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a. Noncumulative preferred stock.
b. Noncumulative and callable preferred stock.
c. Noncumulative and convertible preferred stock.

d. Cumulative preferred stock.
Quinn Corporation issued 10,000 shares of USD 20 par value common stock at USD 50 per share. The amount
that would be credited to Paid-In Capital in Excess of Par Value—Common is:
a. USD 200,000.
b. USD 300,000.
c. USD 500,000.
d. USD 700,000.

e. None of the above.
You are given the following information: Capital Stock, USD 80,000 (USD 80 par); Paid-In Capital in Excess of
Par Value—Common, USD 200,000; and Retained Earnings, USD 400,000. Assuming only one class of stock, the
book value per share is:
a. USD 680.
b. USD 280.
c. USD 80.
d. USD 400.
e. None of the above.

Now turn to “Answers to self-test” at the end of the chapter to check your answers.
Questions

➢ Cite the major advantages of the corporate form of business organization and indicate why each is
considered an advantage.
➢ What is meant by the statement that corporate income is subject to double taxation? Cite several
other disadvantages of the corporate form of organization.
➢ Why is Organization Expense not a good title for the account that records the costs of organizing a
corporation? Could you justify leaving the balance of an Organization Costs account intact
throughout the life of a corporation?

➢ What are the basic rights associated with a share of capital stock if there is only one class of stock
outstanding?
➢ Explain the purpose or function of: (a) the stockholders' ledger, (b) the minutes book, (c) the stock-
transfer agent, and (d) the stock registrar.
➢ What are the differences between par value stock and stock with no-par value?
➢ Corporate capital stock is seldom issued for less than par value. Give two reasons why this statement
is true.

➢ Explain the terms liquidation value and redemption value.
➢ What are the meanings of the terms stock preferred as to dividends and stock preferred as to assets?
➢ What do the terms cumulative and noncumulative mean in regard to preferred stock?
➢ What are dividends in arrears, and how should they be disclosed in the financial statements?

Accounting Principles: A Business Perspective 511 A Global Text