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Exam 11: Corporations: Organization, Stock Transactions, and Dividends

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Question 71

True/False

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A prior period adjustment should be reported as an adjustment to the retained earnings balance at the beginning of the period in which the adjustment was made.

A) True
B) False

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Question 72

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The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to

A) Organizational Expenses
B) Goodwill
C) Common Stock
D) Cash

E) A) and D)
F) All of the above

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Question 73

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A large retained earnings account means that there is cash available to pay dividends.

Match the following stockholders' equity concepts to the appropriate term a-h) . -Equity account reflecting shares "owed" to stockholders

The cost method of accounting for the purchase and sale of treasury stock is a commonly used method.

For the current year ended, ABC had the following transactions: - Issued 10,000 shares of $2.00 par value common stock for $12.00 per share. - Issued 3,000 shares of $50 par value 6% preferred stock for $70 per share. - Purchased 1,000 shares of previously issued common stock for $15.00 per share. - Reported net income of $200,000. - Declared and paid a total dividend of $40,000. Assume that retained earnings had a beginning balance of $75,000. -$330,000

A restriction/appropriation of retained earnings

A company had the following stockholders' equity information available at year-end. - Issued 11,000 shares of $2.00 par value common stock for $12.00 per share. - Issued 5,000 shares of $50 par value 6% preferred stock for $70 per share. - Purchased 1,000 shares of previously issued common stock for $15.00 per share. - Reported net income of $200,000. - Declared and paid the preferred stock dividend. Calculate the earnings per share for the current year.

Double taxation is a disadvantage of a corporation because the corporation has to pay income taxes at twice the rate applied to partnerships.

The Dayton Corporation began the current year with a retained earnings balance of $32,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $7,000. Compute the year-end retained earnings balance.

Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for each year.

Which one of the following would not be considered an advantage of the corporate form of organization?

The excess of issue price over par of common stock is termed an)

Match each of the following stockholders' equity concepts to the appropriate term a-h) . -Document which formally creates a corporation

The following account balances appear on the balance sheet of Osgood Industries: Common Stock 300,000 shares authorized, $100 par): $10,000,000 Paid­In Capital in Excess of Par-Common Stock: $2,000,000 Retained Earnings: $45,000,000 The board of directors declared a 2% stock dividend when the market price of the stock was $135 a share. Required: 1) Journalize the entries to record a) the declaration of the dividend, capitalizing an amount equal to market value b) the issuance of the stock certificates 2) Determine the following amounts before the stock dividend was declared: a) Total paid-in capital b) Total retained earnings c) Total stockholders' equity 3) Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: a) Total paid-in capital b) Total retained earnings c) Total stockholders' equity

A large public corporation normally uses registrars and transfer agents to maintain records of the stockholders.

Kansas Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. The stock is widely traded and selling for $15 per share. At what amount should the building be recorded by Kansas Company?

One of the main disadvantages of the corporate form is the

The Torre Company has the following stockholders' equity account balances in stockholders equity on December 31. Common Stock - $5 par, 60,000 shares issued $300,000 Paid­In Capital in Excess of Par-Common Stock 600,000 Preferred Stock - $100 par, 5,000 shares issued 500,000 Paid­In Capital in Excess of Par-Preferred 100,000 Retained Earnings 200,000 Treasury Stock cost - $12 per share)60,000 1. How many shares of treasury stock are owned? 2. What was the average market price per share at which common stock was issued? 3. What was the average market price per share at which preferred stock was issued? 4. What is the total value of the paid-in capital portion of stockholders' equity? 5. What is the total value of stockholders' equity? 6. How many shares of common stock are outstanding? 7. If net income for the year was $75,000 and a preferred stock dividend of $20,000 was paid, what was the beginning value of retained earnings? How much is earnings per share for the year?

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.