Question

Exercise 11-2

Andrea has prepared the following list of statements about corporations.

Identify each statement as true or false.

1.		Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership.		TrueFalse
2.		Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation.		TrueFalse
3.		When a corporation is formed, organization costs are recorded as an asset.		TrueFalse
4.		Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation.		TrueFalse
5.		The number of issued shares is always greater than or equal to the number of authorized shares.		TrueFalse
6.		A journal entry is required for the authorization of capital stock.		TrueFalse
7.		Publicly held corporations usually issue stock directly to investors.		TrueFalse
8.		The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor.		TrueFalse
9.		The market price of common stock is usually the same as its par value.		TrueFalse
10.		Retained earnings is the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.		TrueFalse

Answer 1

Note: As HOMEWORKLIB RULES Policy one should answer only first four. For your convience I answered all.

1.True

Explanation:

Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership.

2.False

Explanation:

Limited liability of stockholders, government regulations, and additional taxes are the major advantages of a corporation.

3.False

Explanation:

When a corporation is formed, organization costs are not recordered as an asset.

4.True.

Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation.

5.False

The number of issued shares is always lesser than or equal to the number of authorized shares.

6.False

No journal entry is required for the authorization of capital stock

7.false

Publicly held corporations usually issue stock directly to public not investors.

8.True

The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor

9.False

The market price of common stock is not usually the same as its par value

10.False

Retained earnings is the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.Retained earnings are corporate income or profit that is not paid out as dividends. That is, it's money that's retained or kept in the company's accounts