Test bank accounting 25th editon warren chapter 13 corporations or

A corporation has 50,000 shares of $28 par value stock outstanding that has a current market value of $150?. Subsequently, the company declared a 2% stock dividend on a date when the mar

Chapter 13 Corporations: Organization, Stock Transactions, and Dividends

8 Organizational expenses are classified as intangible assets on the balance sheet

14 When no-par common stock with a stated value is issued for cash, the common stock account is credited for

an amount equal to the cash proceeds

17 The issuance of common stock affects both paid-in capital and retained earnings

26 The par value of stock is an arbitrary per share amount defined in many states as legal capital

35 The declaration of a cash dividend decreases a corporation's stockholders equity and decreases its assets True False

38 The declaration and issuance of a stock dividend does not affect the total amount of a corporation's assets,

liabilities, or stockholders' equity

44 The amount of a corporation's retained earnings that has been restricted/appropriated should be reported in the notes to the financial statements

53 The retained earnings statement may be combined with the income statement

True False

54 If paid-in-capital in excess of par/preferred stock is $30,000, preferred stock is $200,000, paid-in-capital in excess of par/common stock is $20,000, common stock is $525,000, and retained earnings is $105,000 (deficit), the total stockholders' equity is $880,000

58 A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of

$150 If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately

61 Which of the following is not characteristic of a corporation?

A The financial loss that a stockholder may suffer from owning stock in a public company is limited

B Cash dividends paid by a corporation are deductible as expenses by the corporation

C A corporation can own property in its name

D Corporations are required to file federal income tax returns

62 Characteristics of a corporation include

A shareholders who are mutual agents

B direct management by the shareholders (owners)

C its inability to own property

D shareholders who have limited liability

64 A disadvantage of the corporate form of business entity is

A mutual agency for stockholders

B unlimited liability for stockholders

C corporations are subject to more governmental regulations

D the ease of transfer of ownership

65 Under the corporate form of business organization

A ownership rights are easily transferred

B a stockholder is personally liable for the debts of the corporation

C stockholders’ acts can bind the corporation even though the stockholders have not been appointed as agents

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

68 Which of the following is not true of a corporation?

A It may enter into binding legal contracts in its own name

B It may sue and be sued

C The acts of its owners bind the corporation

D It may buy, own, and sell property

69 The ability of a corporation to obtain capital is

A less than a partnership

B about the same as a partnership

C restricted because of the limited life of the corporation

D enhanced because of limited liability and ease of share transferability

70 Which of the following statements concerning taxation is accurate?

A Corporations pay federal income taxes but not state income taxes

B Corporations pay federal and state income taxes

C Only the owners must pay taxes on corporate income

D Corporations pay income taxes but their owners do not

73 The state charter allows a corporation to issue only a certain number of shares of each class of stock This amount of stock is called

74 Which of the following is not a right possessed by common stockholders of a corporation?

A the right to vote in the election of the board of directors

B the right to receive a minimum amount of dividends

C the right to sell their stock to anyone they choose

D the right to share in assets upon liquidation

75 The charter of a corporation provides for the issuance of 100,000 shares of common stock Assume that 40,000 shares were originally issued and 10,000 were subsequently reacquired What is the number of shares outstanding?

76 The par value per share of common stock represents

A the minimum selling price of the stock established by the articles of incorporation

B the minimum amount the stockholder will receive when the corporation is liquidated

C an arbitrary amount established in the articles of incorporation

D the amount of dividends per share to be received each year

79 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

80 The price at which a stock can be sold depends upon a number of factors Which statement below is not

one of those factors?

A the financial condition, earnings record, and dividend record of the corporation

B investor expectations of the corporation's earning power

C how high the par value is

D general business and economic conditions and prospects

A 35,000

84 Par value

A is the monetary value assigned per share in the corporate charter

B represents what a share of stock is worth

C represents the original selling price for a share of stock

D is established for a share of stock after it is issued

85 The authorized stock of a corporation

A must be recorded in a formal accounting entry

B only reflects the initial capital needs of the company

C is indicated in its by-laws

D is indicated in its charter

86 If Everly Company issues 1,000 shares of $5 par value common stock for $75,000, the account

A Common Stock will be credited for $75,000

B Paid-in Capital in excess of Par Value will be credited for $5,000

C Paid-in Capital in excess of Par Value will be credited for $70,000

D Cash will be debited for $70,000

A Preferred Stock for $750,000

B Preferred stock for $500,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $250,000

C Preferred Stock for $500,000 and Retained Earnings for $250,000

D Paid-in Capital from Preferred Stock for $750,000

89 Alma Corp issues 1,000 shares of $10 par value common stock at $14 per share When the transaction is recorded, credits are made to:

A Common Stock $14,000

B Common Stock $10,000 and Paid-in Capital in Excess of Par Value $4,000

C Common Stock $4,000 and Paid-in Capital in Excess of Stated Value $10,000

D Common Stock $10,000 and Retained Earnings $4,000

90 Nexis Corp issues 1,000 shares of $15 par value common stock at $22 per share When the transaction is recorded, credits are made to:

A Common Stock $15,000 and Paid-in Capital in Excess of Par Value $7,000

B Common Stock $22,000 and Retained Earnings $15,000

C Common Stock $7,000 and Paid-in Capital in Excess of Stated Value $15,000

D Common Stock $22,000

91 When Bayou Corporation was formed on January 1, 20xx, the corporate charter provided for 100,000 share

of $10 par value common stock The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 9,000 shares of stock at a price of $23 per share The entry to record the above transaction would include a

A debit to Cash for $90,000

B credit to Common Stock for $207,000

C credit to Paid in Capital in Excess of Par for $117,000

D debit to Common Stock for $90,000

92 On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding All 40,000 shares had been issued in a prior period at $20.00 per share On February 1, 20xx, Swenson purchased 4,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx

The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a

A credit to Treasury Stock for $96,000

B debit to Treasury Stock for $96,000

C debit to a loss account for $120,000

D credit to a gain account for $120,000

93 The charter of a corporation provides for the issuance of 100,000 shares of common stock Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired What is the amount of cash dividends to be paid if a $2 per share dividend is declared?

A $ 60,000

B $ 20,000

C $120,000

94 The charter of a corporation provides for the issuance of 100,000 shares of common stock Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired What is the amount of cash dividends to be paid if a $2 per share dividend is declared?

A decrease total liabilities and stockholders’ equity

B increase total expenses and total liabilities

C increase total assets and stockholders’ equity

D decrease total assets and stockholders’ equity

99 Which of the following is not a prerequisite to paying a cash dividend?

A formal action by the board of directors

B market value in excess of par value per share

C sufficient cash

D sufficient retained earnings

100 The liability for a dividend is recorded on which of the following dates?

A the date of record

B the date of payment

C the last day of the fiscal year

D the date of declaration

102 Treasury stock shares are

A shares held by the U.S Treasury Department

B part of the total outstanding shares but not part of the total issued shares of a corporation

C unissued shares that are held by the treasurer of the corporation

D issued shares that have been reacquired by a corporation

103 Which statement below is not a reason for a corporation to buy back its own stock

A resale to employees

B bonus to employees

C for supporting the market price of the stock

D to increase the shares outstanding

105 The excess of sales price of treasury stock over its cost should be credited to

A Treasury Stock Receivable

B Premium on Capital Stock

C Paid-In Capital from Sale of Treasury Stock

D Income from Sale of Treasury Stock

A income will be increased by $500

B stockholders' equity will be increased by $3,500

C stockholders' equity will be increased by $500

D stockholders' equity will not change

108 Treasury stock that had been purchased for $5,600 last month was reissued this month for $8,500 The journal entry to record the reissuance would include a credit to

A Treasury Stock for $8,500

B Paid-In Capital from Treasury Stock for $8,500

C Paid-In Capital in Excess of Par/Common for $2,900

D Paid-In Capital from Treasury Stock for $2,900

110 A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost What will be the effect on total stockholders' equity?

A other expense on income statement

B intangible asset on balance sheet

C stockholders' equity on balance sheet

D other income on income statement

A the number of shares of common stock outstanding

B the number of shares of common stock issued

C the number of shares of common stock authorized

D all of the above

116 Retained earnings

A is the same as contributed capital

B cannot have a debit balance

C changes are summarized in the retained earnings statement

D is equal to cash on hand

117 Which of the following would appear as a prior-period adjustment?

A loss resulting from the sale of fixed assets

B difference between the actual and estimated uncollectible accounts receivable

C error in the computation of depreciation expense in the preceding year

D loss from the restructuring of assets

118 A restriction/appropriation of retained earnings

A decreases total assets

B increases total retained earnings

C decreases total retained earnings

D has no effect on total retained earnings

119 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

121 Treasury stock should be reported in the financial statements of a corporation as a(n)

124 When a corporation completes a 3-for-1 stock split

A the ownership interest of current stockholders is decreased

B the market price per share of the stock is decreased

C the par value per share is decreased

D b and c

125 A corporation has 50,000 shares of $28 par value stock outstanding that has a current market value of

$150 If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately

127 A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at

$8 Subsequently, the company declared a 2% stock dividend on a date when the market price was $11 a share What is the amount transferred from the retained earnings account to paid-in capital accounts as a result

of the stock dividend?

128 A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at

$9 Subsequently, the company declared a 2% stock dividend on a date when the market price was $10 a share The effect of the declaration and issuance of the stock dividend is to

A decrease retained earnings, increase common stock, and increase paid-in capital

B increase retained earnings, decrease common stock, and decrease paid-in capital

C increase retained earnings, decrease common stock, and increase paid-in capital

D decrease retained earnings, increase common stock, and decrease paid-in capital

129 A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at

$8 Subsequently, the company declared a 4% stock dividend on a date when the market price was $12 a share What is the amount transferred from the Retained Earnings account to Paid-in Capital accounts as a result of the stock dividend?

130 Which of the following statements is not true about a 2-for-1 split?

A Par value per share is reduced to half of what it was before the split

B Total contributed capital increases

C The market price will probably decrease

D A stockholder with ten shares before the split owns twenty shares after the split

131 A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of

$150 If the corporation issues a 5-for-1 stock split, the market value of the stock after the split will be

132 A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of

$120 If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be:

133 A corporation has 60,000 shares of $25 par value stock outstanding that has a current market value of

$120 If the corporation issues a 5-for-1 stock split, the number of shares outstanding will be:

134 Earnings per share

A is the net income per common share

B must be reported by publicly traded companies

C helps compare companies of different sizes

D all of the above

135 Samuels, Inc reported net income for 2011 is $105,000 During 2011 the company had 5,000 shares of

$100 par, 5% preferred stock and 20,000 of $5 par common stock outstanding Samuels’ earnings per share for

137 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:

140 Match the following stockholders equity concepts to the appropriate answer

1 a company whose shares can be bought and sold

2 creditors cannot pursue stockholder’s personal

assets to satisfy claims

publicly held corporation

3 rules and procedures for corporate conduct of its

4 formally creates a corporation

privately held corporation

5 company whose shares are not bought or sold on

a stock exchange

articles of incorporation

6 responsible for establishing corporate policies limited liability

7 a legal entity, separate from the people who

create and operate it board of directors

8 earnings of a company distributed to

141 Match the following stockholders equity concepts to the most appropriate answer

1 the number of sharing originally sold to

stockholders

additional paid in

capital

2 a class of stock that does not provide voting

3 account used when issue price exceeds par value

4 a value established for the protection of

5 the maximum number of shares a company can

issue to shareholders authorized shares

6 a class of stock that provides voting rights for

7 the number of shares currently held by

8 a value that the stock is worth on the stock

142 Match the following stockholder’s equity concepts to the best answer

1 distribution of a company’s earnings to

stockholders

stock dividends distributable

2 equity account reflecting shares “owed” to

3 account used when shares are issued for an

amount greater than par value preferred stock

4 when dividends are actually distributed to

5 Shares of common stock re-acquired by a

company

additional paid in

capital

6 entitled to receive dividends first declaration date

7 this event creates a liability to company record date

8 the date that a share of stock must be owned to

receive current dividend payment date

143 Match the value to the appropriate account For the year ended 2012 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 1000 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

2 550,000 Additional Paid in Capital - Common Stock

3 $150,000 Additional Paid in Capital - Preferred Stock

7 15,000 Total Stockholders Equity

144 A company had stock outstanding as follows during each of its first three years of operations: 2,500 shares

of $10, $100 par, cumulative preferred stock and 50,000 shares of $10 par common stock The amounts

distributed as dividends are presented below Determine the total and per share dividends for each class of stock for each year by completing the schedule

146 On May 10, a company issued for cash 1,500 shares of no-par common stock (with a stated value of $2) at

$14, and on May 15, it issued for cash 2,000 shares of $15 par preferred stock at $58

Journalize the entries for May 10 and 15, assuming that the common stock is to be credited with the stated value

148 On April 10, a company acquired land in exchange for 1,000 shares of $20 par common stock with a current market price of $73 Journalize this transaction

149 Sabas Company has 20,000 shares of $100 par, 1% non-cumulative preferred stock and 100,000 shares of

$50 par common stock The following amounts were distributed as dividends:

151 Sabas Company has 40,000 shares of $100 par, 1% preferred stock and 100,000 shares of $50 par common stock The following amounts were distributed as dividends:

152 A corporation, which had 18,000 shares of common stock outstanding, declared a 3-for-1 stock split

(a) What will be the number of shares outstanding after the split?

(b) If the common stock had a market price of $240 per share before the stock split, what would be an approximate market price

per share after the split?

(c) Journalize the entry to record the stock split

154 The dates of importance in connection with a cash dividend of $50,000 on a corporation’s common stock are January 15, February 15, and March 15 Journalize the entries required on each date

(a) Journalize the entries to record the purchase (treasury stock is recorded at cost)

(b) Journalize the entries to record the sale of the stock

157 On June 5, Belen Corporation reacquired 3,300 shares of its common stock at $45 per share On July 15, Belen sold 2,000 of the reacquired shares at $48 per share On August 30, Belen sold the remaining shares at

159 Morocco Inc reported the following results for the year ending April 30, 2014:

Prepare a retained earnings statement for the fiscal year ended April 30, 2014.

160 Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect a company's total assets, liabilities, and stockholders' equity

162 Future Sources, Inc reported the following results for the year ending July 31, 2012:

Prepare a retained earnings statement for the fiscal year ended July 31, 2012.

164 The following account balances appear on the balance sheet of Osgood Industries:

Common Stock (300,000 shares authorized, $100 par): $10,000,000

Paid-in 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 Osgood reported no income or loss for the current year

b the issuance

of the stock certificat

retained earnings

; and

stockhol ders’ equity

retained earnings

; and

c Total

stockhol ders’

Required:

(2) What is the balance in Paid-in Capital from Sale of Treasury Stock on December 31, of the current year?

(1) What will be the number of shares outstanding after the split?

(2) If the common stock had a market price of $280 per share before the stock split, what would be an approximate

market price per share after the split?

167 Selected transactions completed by Breezeway Construction during the current fiscal year are as follows:

were 250,000 common shares outstanding

stock to stockholders of record on May 10, payable on June 9

the stock dividend) In addition, a 2% common stock dividend was declared on the common stock outstanding The fair market value of the common stock is estimated at $36

Required: Journalize the transactions.

169 Solar Company has 600,000 shares of $75 par common stock outstanding On February 13, Solar declared

a 3% stock dividend to be issued on April 30 to stockholders of record on March 14 The market price of the stock was $90 per share on February 13

Required: Journalize the entries required on February 13, March 14, and April 30

170 On February 1, Marine Company reacquired 7,500 shares of its common stock at $30 per share On March 15, Marine sold 4,500 of the reacquired shares at $34 per share On June 2, Marine sold the remaining shares at $28 per share

Required: Journalize the transaction of February 1, March 15, and June 2

171 The following transactions took place for the XYZ Corporation;

a November 12th - Declared a total cash dividend of $45,000 for stockholders of record November 20th payable on December 1st Record the journal entry, if necessary, for the following events;

172 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

173 On January 1, 2011 a company had the following data:

- 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% cumulative preferred stock for $70 per share

- purchased 1,000 shares of previously issued common stock for $15.00 per share

The company had the following dividend information available:

2011 - No dividend paid

2012 - Paid a $2,000 total dividend

2013 - Paid a $17,000 total dividend

2014 - paid a $32,000 total dividend

Using the following format, fill in the correct values for each year;

2011 2012 2013 2014

Common stock dividend

Preferred stock dividend

174 A corporation was organized on January 1 of the current year, with an authorization of 20,000 shares of $4 preferred stock, $12 par, and 100,000 shares of $3 par common stock

The following selected transactions were completed during the first year of operations:

31 Issued 200 shares of common stock to an attorney in payment of legal fees for organizing the corporation The value of

the stock at the time of payment was $25 per share

Feb 24 Issued 20,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $65,000

$120,000, and $45,000 respectively

Mar 15 Issued 2,000 shares of preferred stock at $56 for cash

Required: Journalize the transactions.

175 Prepare entries to record the following:

(a) Issued 1,000 shares of $15 par common stock at $54 for cash

(b) Issued 1,400 shares of no-par common stock in exchange for equipment with a fair market price of $24,000

(c) Purchased 100 shares of treasury stock at $26

(d) Sold 100 shares of treasury stock purchased in (c) at $29

176 On April 10, Maranda Corporation issued for cash 11,000 shares of no-par common stock at $25 On May

5, Maranda issued at par 1,000 shares of 4%, $50 par preferred stock for cash On May 25, Maranda issued for cash 15,000 shares of 4%, $50 par preferred stock at $55

Journalize the entries to record the April 10, May 5, and May 25 transactions

177 Prepare entries to record the following:

(a) Issued 1,000 shares of $10 par common stock at $56 for cash

(b) Issued 1,400 shares of common stock in exchange for equipment with a fair market price of $21,000

(c) Purchased 100 shares of treasury stock at $25

(d) Sold 100 shares of treasury stock at $30

178 Prepare entries to record the following:

(a) Issued 1,000 shares of $10 par common stock at $59 for cash

(b) Issued 1,400 shares of common stock in exchange for equipment with a fair market price of $60,000

(c) Purchased 100 shares of treasury stock at $32

(d) Sold 100 shares of treasury stock at $42

179 Wonder Sales is authorized to issue 100,000 shares of $100 par, 2% preferred stock and 1,000,000 shares

of $10 par common stock

(a) On January 2nd, Wonder Sales issues 5,000 shares of preferred stock for $110 per share and 65,000 shares

of common stock at $10 per share Journalize this issuance

(b) On January 25th, Wonder Sales issued 250 shares of preferred stock to a Morton Law Firm for settlement of

an invoice for incorporation services The invoice was for $36,000 Journalize this issuance

(c) On January 31st, Wonder Sales issues 500 shares of common stock to Setup Inc for fixtures The fixtures have a fair market value of $8,500 Journalize this issuance

180 Carmen Company a publicly traded company with preferred and common stock issued As of January 1st,

it had 50,000 shares of $100 par, 2% preferred stock outstanding and 250,000 shares of $10 par common stock outstanding

(a) On January 31st, the Board of Directors issues a requirement to purchase 5,000 shares of its common stock

at market price The shares are purchased at a market price of $22 per share Journalize the purchase utilizing the cost concept

(b) On March 15th, Carmen declares a dividend on preferred stock of $2.75 per share The date of record is March 25th and the date of payment is March 31st Journalize these events

(c) On December 1st, Carmen declares a cash dividend on common stock of $0.12 per share The date of record

is December 15th and the date of payment is December 21st Journalize these events

(d) On December 27th the board orders that 2,500 shares of treasury stock be sold The sale price is $25 per share Journalize this event

181 A company has 10,000 shares of $10 par common stock outstanding Prepare entries to record the following:

(a) Purchased 1,000 shares of treasury stock at $12 The treasury stock is accounted for by the cost method

(b) Sold 500 shares of treasury stock at $15

(c) Purchased equipment for $75,000, paying $25,000 in cash and issuing 4,000 shares of common stock for the remaining

(d) Sold 500 shares of treasury stock at $11

(a) Purchased 1,500 shares of treasury stock at $16 The treasury stock is accounted for by the cost method

(b) Sold 1,000 shares of treasury stock at $19

(c) Purchased equipment for $80,000, paying $25,000 in cash and issuing 4,000 shares of common stock for the remaining

(d) Sold 500 shares of treasury stock at $14

183 Journalize the following selected transactions completed during the current fiscal year:

Jan 3 The board of directors declared a stock split which reduced the par of common shares from $100 to $20 This action increased

the number of outstanding shares to 400,000