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Exam 11: Proprietorships,partnerships,and Corporations

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Question 1

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Which of the following is a disadvantage of a sole proprietorship?

A) Entrenched management
B) Double taxation
C) Personal liability
D) Excessive regulation

E) None of the above
F) A) and B)

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Question 2

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Which of the following statements best describes the term "par value?"

A) The number of shares currently in the hands of stockholders
B) The amount that must be paid to purchase a share of stock
C) Determined by dividing total stockholder's equity by the number of shares of stock
D) An amount used in determining a corporation's legal capital

E) B) and D)
F) C) and D)

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Question 3

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The board of directors of Chandler Company declared a cash dividend.Which of the following choices accurately reflects how this event would affect the elements of the company's financial statements?

Van Buren Corporation issued 5,000 shares of $6 par common stock for $24 per share.For this transaction,Common Stock should be credited (increased)for $120,000.

A high price-earnings ratio generally means that investors are optimistic about a company's future growth.

On January 2,Year 1,Torres Corporation issued 20,000 shares of $10 par-value common stock for $11 per share.Which of the following statements is true?

An appropriation of retained earnings restricts the amount of dividends that a corporation can declare in the future.

How is treasury stock reported on a corporation's balance sheet?

Treasury Stock is a stockholders' equity account that has a normal credit balance.

Which form of business organization is established as a separate legal entity?

Fred and Barney started a partnership.During Year 1,Fred invested $20,000 in the business and Barney invested $32,000.The partnership agreement called for each partner to receive an annual distribution equal to 15% of his capital contribution.Any further earnings were to be retained in the business and divided equally between the partners.The partnership reported net income of $38,000 during Year 1.How will the $38,000 of net income be split between Fred and Barney respectively? (Hint: Consider both the cash withdrawals and allocation of remaining income. ) Fred Barney

On January 12,Year 1,Gilliam Corporation issued 550 shares of $12 par-value common stock for $15 per share.The number of shares authorized is 5,000,and the number of shares outstanding prior to this transaction was 1,200.Which of the following describes the effect of the January 12 transaction on the elements of the financial statements?

For Year 2,the Sacramento Corporation had beginning and ending Retained Earnings balances of $208,054 and $231,012,respectively.Also during Year 2,the board of directors declared cash dividends of $29,000,which were paid during Year 2.The board also declared a stock dividend,which was issued and required a transfer in the amount of $16,000 to paid-in capital.Total expenses during Year 2 were $32,916.Based on this information,what was the amount of total revenue for Year 2?

Weller Corporation issued 10,000 shares of no-par common stock for $25 per share.For this transaction,Common Stock should be credited (increased)for $250,000.

Which of the following would not be a reason to expect an increase in the market price of the stock of Carlyle Corporation?

Preferred stockholders generally have no voting rights in a corporation.

A distribution by a sole proprietorship to the owner is called a withdrawal.

Which of the following statements about why companies choose not to pay cash dividends is (are) true?

Treasury Stock is reported on the balance sheet between the liabilities and stockholders' equity sections.

During the year,Todd Corporation issued 200 shares of $20 par value common stock for $50 a share.A total of 500 shares were authorized.In addition,the company purchased 75 shares of treasury stock at $44 a share.Which of the following best presents the related lines in the stockholders' equity section of the company's balance sheet?