Exam 11: Corporations: Organization, Stock Transactions

A stockholders' equity statement shows

A corporation can be organized for the purpose of making a profit or it may be not-for-profit.

Stock dividends and stock splits have the following effects on retained earnings:

The return on common stockholders' equity is computed by dividing net income available to common stockholders by

On May 1, Howard Corporation purchased 2,000 shares of its $10 par value common stock at a cash price of $15/share. On July 15, 900 shares of the treasury stock were sold for cash at $17/share. Instructions Journalize the two transactions.

If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to

The _______________ feature of preferred stock gives the preferred stockholders the right to receive current-year dividends and unpaid prior-year dividends before common stockholders receive any dividends.

Rex Company reported retained earnings at December 31, 2017, of $420,000. Reese had 180,000 shares of common stock outstanding throughout 2018. The following transactions occurred during 2018. 1. Net income was $295,000. 2. A cash dividend of $0.50 per share was declared and paid. 3. A 5% stock dividend was declared and distributed when the market price per share was $15 per share. Instructions Prepare a retained earnings statement for 2018.

Stockholders generally have the right to share in corporate _______________ and in ______________ upon liquidation.

A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

Preferred stock has contractual preference over common stock in certain areas.

Which of the following statements about a cash dividend is incorrect?

The following stockholders' equity accounts, arranged alphabetically, are in the ledger of Star Corporation at December 31, 2018. Instructions Prepare the stockholders' equity section of the balance sheet at December 31, 2018.

The stockholders' equity section of Maria Corporation at December 31, 2017, included the following: 6% preferred stock, $100 par value, cumulative, 10,000 shares authorized, 8,000 shares issued and outstanding $ 800,000 Common stock, $10 par value, 250,000 shares authorized, 200,000 shares issued and outstanding $2,000,000 Dividends were not declared on the preferred stock in 2017 and are in arrears. On September 15, 2018, the board of directors of Maria Corporation declared dividends on the preferred stock for 2017 and 2018, to stockholders of record on October 1, 2018, payable on October 15, 2018. On November 1, 2018, the board of directors declared a $.50 per share dividend on the common stock, payable November 30, 2018, to stockholders of record on November 15, 2018. Instructions Prepare the journal entries that should be made by Maria Corporation on the dates indicated below: September 15, 2018 November 1, 2018 October 1, 2018 November 15, 2018 October 15, 2018 November 30, 2018

Identify at least six characteristics of the corporate form of business organization. Contrast each one with the partnership form of organization 1. Is Mr. Carlson's suggestion ethical? Explain. 2. Is it ethical to discontinue the cash dividend? Explain.

The authorized stock of a corporation

If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation.

Dillon Corporation splits its common stock 2 for 1, when the market value is $40 per share. Prior to the split, Dillon had 50,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock

Darling Corporation issued 200,000 shares of $20 par value, 5% preferred stock on January 1, 2016, for $4,500,000. In December 2018, Darling declared its first dividend of $800,000. Instructions (a) Prepare Darling's journal entry to record the issuance of the preferred stock. (b) If the preferred stock is not cumulative, how much of the $800,000 would be paid to common stockholders? (c) If the preferred stock is cumulative, how much of the $800,000 would be paid to common stockholders?

If no-par stock is issued without a stated value, then