If a Corporate Charter Includes a Provision for Preemptive Rights

question 64

Multiple Choice

If a corporate charter includes a provision for preemptive rights, the original stockholders

• A) must sell their stock to the company.
• B) get first option to buy additional issues of common stock.
• C) may purchase existing treasury stock.
• D) cannot utilize cumulative voting procedures.

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Definitions:

Post-closing Trial Balance

A financial statement prepared after closing entries are made, listing only the balance sheet accounts with non-zero balances.

Ledger

A principal book or computer file for recording and totaling economic transactions measured in terms of a monetary unit of account by account type.

Income Summary

An account in the ledger used to summarize revenues and expenses for a specific period before transferring the net result to capital accounts.

Worksheet

A document or tool used by accountants to draft adjustments and test balances during the end-of-period reporting process, not part of the formal financial statements.