BUL 5810 – CORPORATIONS TEST
QUESTIONS WITH CERTIFIED
ANSWERS
Barbara, a self-made millionaire, wants to start a corporation exclusively for charitable
and educational purposes. What type of corporation should Barbara form? - Answer-
Non-profit corporation
In the case of Harold Lang Jewelers, Inc. v. Johnson, the court found that: - Answer-
Lang's business was regular, continuous and substantial such that it was transacting
business in North Carolina
In the case of Coopers & Lybrand v. Fox, the court held: - Answer-a promoter is
personally liable for the contracts he makes
The case of Harris v. Looney dealt with the issue of: - Answer-personal liability for a
debt by a person purporting to act as or on behalf of a corporation, knowing no
corporation existed.
Which of the following is correct with regard to common stock? - Answer-Common stock
does not have any special contract rights or preferences
__________, usually called debentures, have only the obligation of the corporation
behind them. - Answer-Unsecured bonds
Par value: - Answer-is the minimum price at which the corporation may sell the stock at
issuance
The board of directors cannot declare dividends when the corporation: - Answer-is
insolvent
A corporation's proportional distribution of additional shares of the corporation's capital
stock to its shareholders is a: - Answer-stock or share dividend
What are the principal sources for corporate financing? - Answer-Debt
Equity Investment Securities
Retained Earnings
The most customary type of dividend is a: - Answer-cash dividend
, Which of the following determines when to declare dividends and in what amount? -
Answer-Board of Directors
All states impose a "cash flow test" on the payment of dividends or other distributions.
The "cash flow test" is also known as the: - Answer-Equity Solvency Test
State laws that regulate the issuance and sale of securities are known as: - Answer-
Blue sky Laws
The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay
more if corporate earnings reach certain specified levels. The holder of the bond may
exchange it for stock of the corporation. This bond would be a: - Answer-convertible
bond
Allen owns 200 of the 1,000 shares outstanding of General Myopics. GM plans to issue
1,000 new shares. If Allen has preemptive rights, he may buy: - Answer-200 shares at
the new stock price
Yukon Corporation purchases 1,000 shares of its own stock from Jones at a price of
$50 a share. These shares, which are now issued but not outstanding, are known as: -
Answer-Treasury Shares
The directors of Premier Glass Company authorize the issuance of 100 shares of
common stock for $25 per share to Justin for property the directors value at $2,500. The
valuation: - Answer-under the Revised Act, depends on the directors' determination of
the consideration's "adequacy"
If The Raintree Company has accumulated earnings each year but the directors have
not declared dividends for five years, the shareholders may: - Answer-ask for an
injunction requiring a dividend to be declared
If Alfred seeks to find out what the par value of his stock in Denim Corporation, Alfred
wants to know: - Answer-the minimum price at which Denim Corporation may sell the
stock at issuance
Denali, Inc. is seeking to pay out dividends to all of its shareholders and seeks advice
on the customary type of dividend to pay out to its shareholders. What advice would you
give Denali, Inc.? - Answer-Pay shareholders cash dividends
Patrick, a shareholder in Denali, Inc., thinks that the company is doing well, but wants to
know when and who decided when to declare dividends and how much, and he seeks
your advice. What advice would you give Patrick to answer his questions about
dividends? - Answer-Wait for the Board of Directors to declare dividends
Under the Revised Act, Lupita owns common stock in XeroSum Corporation. Lupita
believes that her common stock is preferred stock. Which of the following is correct with
QUESTIONS WITH CERTIFIED
ANSWERS
Barbara, a self-made millionaire, wants to start a corporation exclusively for charitable
and educational purposes. What type of corporation should Barbara form? - Answer-
Non-profit corporation
In the case of Harold Lang Jewelers, Inc. v. Johnson, the court found that: - Answer-
Lang's business was regular, continuous and substantial such that it was transacting
business in North Carolina
In the case of Coopers & Lybrand v. Fox, the court held: - Answer-a promoter is
personally liable for the contracts he makes
The case of Harris v. Looney dealt with the issue of: - Answer-personal liability for a
debt by a person purporting to act as or on behalf of a corporation, knowing no
corporation existed.
Which of the following is correct with regard to common stock? - Answer-Common stock
does not have any special contract rights or preferences
__________, usually called debentures, have only the obligation of the corporation
behind them. - Answer-Unsecured bonds
Par value: - Answer-is the minimum price at which the corporation may sell the stock at
issuance
The board of directors cannot declare dividends when the corporation: - Answer-is
insolvent
A corporation's proportional distribution of additional shares of the corporation's capital
stock to its shareholders is a: - Answer-stock or share dividend
What are the principal sources for corporate financing? - Answer-Debt
Equity Investment Securities
Retained Earnings
The most customary type of dividend is a: - Answer-cash dividend
, Which of the following determines when to declare dividends and in what amount? -
Answer-Board of Directors
All states impose a "cash flow test" on the payment of dividends or other distributions.
The "cash flow test" is also known as the: - Answer-Equity Solvency Test
State laws that regulate the issuance and sale of securities are known as: - Answer-
Blue sky Laws
The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay
more if corporate earnings reach certain specified levels. The holder of the bond may
exchange it for stock of the corporation. This bond would be a: - Answer-convertible
bond
Allen owns 200 of the 1,000 shares outstanding of General Myopics. GM plans to issue
1,000 new shares. If Allen has preemptive rights, he may buy: - Answer-200 shares at
the new stock price
Yukon Corporation purchases 1,000 shares of its own stock from Jones at a price of
$50 a share. These shares, which are now issued but not outstanding, are known as: -
Answer-Treasury Shares
The directors of Premier Glass Company authorize the issuance of 100 shares of
common stock for $25 per share to Justin for property the directors value at $2,500. The
valuation: - Answer-under the Revised Act, depends on the directors' determination of
the consideration's "adequacy"
If The Raintree Company has accumulated earnings each year but the directors have
not declared dividends for five years, the shareholders may: - Answer-ask for an
injunction requiring a dividend to be declared
If Alfred seeks to find out what the par value of his stock in Denim Corporation, Alfred
wants to know: - Answer-the minimum price at which Denim Corporation may sell the
stock at issuance
Denali, Inc. is seeking to pay out dividends to all of its shareholders and seeks advice
on the customary type of dividend to pay out to its shareholders. What advice would you
give Denali, Inc.? - Answer-Pay shareholders cash dividends
Patrick, a shareholder in Denali, Inc., thinks that the company is doing well, but wants to
know when and who decided when to declare dividends and how much, and he seeks
your advice. What advice would you give Patrick to answer his questions about
dividends? - Answer-Wait for the Board of Directors to declare dividends
Under the Revised Act, Lupita owns common stock in XeroSum Corporation. Lupita
believes that her common stock is preferred stock. Which of the following is correct with
