Question

True/ false & Why

1. Contributed capital is equivalent to paid-in capital.
2. Common stock is considered the legal capital of the corporation.
3. Cumulative preferred stock means the stock is entitled to its regular dividend plus an additional share of the total amount of declared dividends.
4. A corporation is a legal entity separate from its owners; it may sue and be sued, but it may not own property in its own name.

Answer 1

1. Contributed capital is equivalent to paid in capital - True

Contributed capital which is also known as paid in capital, is the amount of cash and other assets that shareholders have given to the company in exchange for stock. In other words, this is the pruce that the shareholder's paid for their ownership stake in the company.

2. Commom stock is considered the legal capital of the corporation - True

Legal capital is that amount of a company's equity that can not legally be allowed to leave the business, it can not be distributed through a dividend or any other means. It is the par value of common stock and the stated value of the preferred stock that a business has sold or issued to investors.

3. False

Cumulative preferred stock is a stock with a provision that stipulates that if any dividend payments have been missed in the past, the dividends owed must be paid out to cumulative preferred shareholders first. They will not get any additional dividend but their regular dividend will be cumulative if not paid in any year.

4. This sentence is partially correct.

A corporation is a legal entity separate from its owners. It can sue and be sued.

It can not own property in its own name is not true.

A company can own property in its own name as it is separate legal entity. It can buy, hold and sell property in its own name.