51. The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.
52. The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.
53. A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.
54. A stock split results in a transfer at market value from retained earnings to paid-in capital.
55. If a company has preferred stock, the preferred stock dividend is added to net income when computing earnings per common share.
56. Which of the following is not characteristic of a corporation?
A. The financial loss that a stockholder may suffer from owning stock in a public company is limited.
B. Cash dividends paid by a corporation are deductible as expenses by the corporation.
C. A corporation can own property in its name.
D. Corporations are required to file federal income tax returns.
57. Characteristics of a corporation include
A. shareholders who are mutual agents
B. direct management by the shareholders (owners)
C. its inability to own property
D. shareholders who have limited liability
58. One of the main disadvantages of the corporate form is the
A. professional management
B. double taxation of dividends
C. charter
D. corporation must issue stock
59. A disadvantage of the corporate form of business entity is
A. mutual agency for stockholders
B. unlimited liability for stockholders
C. corporations are subject to more governmental regulations
D. the ease of transfer of ownership
60. Under the corporate form of business organization
A. ownership rights are easily transferred.
B. a stockholder is personally liable for the debts of the corporation.
C. stockholders’ acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.
D. stockholders wishing to sell their corporation shares must get the approval of other stockholders.