The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the

The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the

a. pro forma method.
b. proportional method.
c. incremental method.
d. either the proportional method or the incremental method.


Answer: either the proportional method or the incremental method

Stockholders' equity is generally classified into two major categories:

Stockholders' equity is generally classified into two major categories:

a. contributed capital and appropriated capital.
b. appropriated capital and retained earnings.
c. retained earnings and unappropriated capital.
d. earned capital and contributed capital.


Answer: earned capital and contributed capital.

In a corporate form of business organization, legal capital is best defined as

In a corporate form of business organization, legal capital is best defined as

a. the amount of capital the state of incorporation allows the company to accumulate over its existence.
b. the par value of all capital stock issued.
c. the amount of capital the federal government allows a corporation to generate.
d. the total capital raised by a corporation within the limits set by the Securities and Exchange Commission.


Answer: the par value of all capital stock issued.

Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders

Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders

a. are entitled to a dividend every year in which the business earns a profit.
b. have the rights to specific assets of the business.
c. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.
d. can negotiate individual contracts on behalf of the enterprise.


Answer: bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership

Total stockholders' equity represents

Total stockholders' equity represents

a. a claim to specific assets contributed by the owners.
b. the maximum amount that can be borrowed by the enterprise.
c. a claim against a portion of the total assets of an enterprise.
d. only the amount of earnings that have been retained in the business.


Answer: a claim against a portion of the total assets of an enterprise

A primary source of stockholders' equity is

A primary source of stockholders' equity is

a. income retained by the corporation.
b. appropriated retained earnings.
c. contributions by stockholders.
d. both income retained by the corporation and contributions by stockholders.


Answer: both income retained by the corporation and contributions by stockholders

Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity.

Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity.

Answer: false