1. A corporation differs from a proprietorship and a partnership in that
| a. a corporation is considered a separate legal entity for taxation purposes. |
| b. the owners of the corporation do not have a claim on the net assets of the business. |
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c. assets and liabilities are presented differently on the balance sheet. |
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d. the cost principle only applies to proprietorships and partnerships. |
2. Which of the following statements about small stock dividends is true?
| A debit to Retained Earnings for the par value of the shares issued should be made. |
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a. A small stock dividend decreases total stockholders’ equity. |
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b. Market value per share should be assigned to the dividend shares. |
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c. A small stock dividend ordinarily will have no effect on book value per share of stock |
d. a debit to Retained Earnings for the par value of the shares issued should be made.
3. When a cash dividend is declared and the company has both cumulative preferred stock and common stock, which of the following must be paid first?
| a. Dividends in arrears, common stock. |
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b. Dividends in arrears, preferred stock. |
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c. Current dividend, common stock. |
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d. Current dividend, preferred stock. |
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