Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo

Multiple Choice

1.

D

3.

A

5.

D

7.

D

9.

B

11.

A

13.

C

15.

C

17.

D

19.

D

21.

B

23.

C

Questions

1.

Advantages of raising capital through stock include no repayment, no interest, and no mandatory dividends. Disadvantages include giving up ownership and marketability of stock. Debt requires repayment and an interest component. Interest is tax deductible whereas dividends are not.

3.

The incorporation laws and which states have favorable laws for corporations.

5.

To affect the market price, avoid takeover, and limit need for dividend payouts.

7.
Land 12,000  
     Common Stock   6,000
     Additional Paid-in Capital from Common Stock - 6,000
9.
Equipment 10,000  
     Common Stock   5,000
     Additional Paid-in Capital from Common Stock   5,000
11.
Dividends Payable 25,000  
     Cash   25,000
13.

In total, there is no change to the total dollar value of the equity section, just a change in the number of shares outstanding and a change in the par or stated value of the stock.

15.

Owners’ equity is the value of assets in a company that remains after liabilities are fulfilled. It is also referred to as net worth or net assets.

17.

An example would be the omission of a payroll accrual or a warranty estimate.

19.

Comparative balance sheets and income statements.

21.

Yes, as one analytical tool among others.

23.

EPS is the only ratio required by GAAP to be reported on the face of the income statement. It must be reported in two ways: basic and diluted (if applicable).

Order a print copy

As an Amazon Associate we earn from qualifying purchases.

Citation/Attribution

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution-NonCommercial-ShareAlike License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters
Citation information

© Dec 13, 2023 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.