Question 1

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Accepted Answer

A)  Additional taxes 
B)  Government regulations 
C)  Limited liability of stockholders 
D)  Separation of ownership and management 
A)  Additional taxes 
B)  Government regulations 
C)  Limited liability of stockholders 
D)  Separation of ownership and management

Question 2

In its first year of operations Banner Elk Corporation had the following transactions pertaining to its $10 par value preferred stock. Feb. 1 $\quad $ Issued 6,000 shares for cash at $\$ 43$ per share.
Nov. 1 $\quad $ Issued 3,000 shares for cash at $\$ 45$ per share.
 Instructions
(a) Journalize the transactions.
(b) Indicate the amount to be reported for (1) preferred stock and (2) paid-in capital in excess of par - preferred stock at the end of the year.

Accepted Answer

None

Question 3

H. Tillman performed legal services for J. Laney. Due to a cash shortage an agreement was reached whereby J. Laney. would pay H. Tillman a legal fee of approximately $4000 by issuing 1000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $4.50 per share. Given this information the journal entry for J. Laney. to record this transaction is: a. 
$\begin{array}{llr}
  \text {  Legal Expense} &4,500\
 \text {Common Stock  } &&4,500\
\end{array}$

b.
$\begin{array}{llr}
  \text {Legal Expense  } &4,000\
 \text { Common Stock } &&4,000\
\end{array}$

c.
$\begin{array}{llr}
  \text {  Legal Expense} &4,000\
 \text {Common Stock  } &&1,000\
 \text { Paid-in Capital in Excess of Par - Common } &&3,000
\end{array}$

d. 
$\begin{array}{llr}
  \text {Legal Expense } &4,500\
 \text { Common Stock } &&1,000\
 \text {Paid-in Capital in Excess of $ \mathrm{Par} $ - Common  } &&3,500
\end{array}$

Accepted Answer

The answer of H. Tillman performed legal services for J....

Question 4

If a corporation has only one class of stock it is referred to as

Accepted Answer

A)  classless stock. 
B)  preferred stock. 
C)  solitary stock. 
D)  common stock. 
A)  classless stock. 
B)  preferred stock. 
C)  solitary stock. 
D)  common stock.

Question 5

Stock can be issued only in exchange for cash.

Accepted Answer

A) True 
 B)False

Question 6

The par value of stock issued for noncash assets is never a factor in determining the cost of the assets received.

Accepted Answer

A) True 
 B)False

Question 7

In the stockholders' equity section of the balance sheet the classification of capital stock consists of

Accepted Answer

A)  additional paid-in capital and common stock. 
B)  common stock and treasury stock. 
C)  common stock preferred stock and treasury stock. 
D)  common stock and preferred stock. 
A)  additional paid-in capital and common stock. 
B)  common stock and treasury stock. 
C)  common stock preferred stock and treasury stock. 
D)  common stock and preferred stock.

Question 8

Katy Hooper Inc. issued 6000 shares of no-par common stock with a stated value of $5 per share. The market price of the stock on the date of issuance was $14 per share. The entry to record this transaction includes a

Accepted Answer

A)  debit to Cash for $30000. 
B)  credit to Common Stock for $84000. 
C)  credit to Common Stock for $30000. 
D)  debit to Paid-in Capital in Excess of Par for $84000. 
A)  debit to Cash for $30000. 
B)  credit to Common Stock for $84000. 
C)  credit to Common Stock for $30000. 
D)  debit to Paid-in Capital in Excess of Par for $84000.

Question 9

The par value of common stock must always be equal to its market value on the date the stock is issued.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following represents the largest number of common shares?

Accepted Answer

A)  Treasury shares 
B)  Issued shares 
C)  Outstanding shares 
D)  Authorized shares 
A)  Treasury shares 
B)  Issued shares 
C)  Outstanding shares 
D)  Authorized shares

Question 11

Two classifications appearing in the paid-in capital section of the balance sheet are

Accepted Answer

A)  preferred stock and common stock. 
B)  paid-in capital and retained earnings. 
C)  capital stock and additional paid-in capital. 
D)  capital stock and treasury stock. 
A)  preferred stock and common stock. 
B)  paid-in capital and retained earnings. 
C)  capital stock and additional paid-in capital. 
D)  capital stock and treasury stock.

Question 12

Kaenzig Coffee Company issued 1000 shares of no-par common stock for $11000. Which of the following journal entries would be made if the stock has a stated value of $2 per share? a.
$\begin{array}{llr}
  \text {Cash  } &11,000\
 \text {  Common Stock} &&11,000\
\end{array}$

b. 
$\begin{array}{llr}
  \text { Cash } &11,000\
 \text {  Common Stock} &&2,000\
 \text {  Paid-in Capital in Excess of Par} &&9,000
\end{array}$

c. 
$\begin{array}{llr}
  \text {Cash  } &11,000\
 \text { Common Stock } &2,000\
 \text { Paid-in Capital in Excess of Stated Value } &9,000
\end{array}$

d.
$\begin{array}{llr}
  \text {  Common Stock} &11,000\
 \text {  Cash} &&11,000\
\end{array}$

Accepted Answer

The answer of Kaenzig Coffee Company issued 1000 shares of...

Question 13

Rob Rote the president and CEO of RRR Waste Management was recently hospitalized suffering from exhaustion and a heart ailment. Immediately prior to his hospitalization RRR had experienced a sharp decline in its stock price and trading activity became almost nonexistent. The primary reason for this was concern expressed in the media over a new untested waste management system implemented by the company. Mr. Rote had been unwilling to submit the procedure to testing before implementation but he reluctantly agreed to limited tests after the system was operational. No problems have been identified by the tests to date.
The other members of management called a meeting to determine what they should do. Randy Smith the marketing manager suggested that the company purchase a large number of shares of treasury stock. In that way investors might notice that activity had picked up and might decide to buy some more shares. This plan would use up most of the company's available cash so that there will be no money available for a cash dividend. RRR has paid cash dividends every quarter for over ten years.
Required:
1. Is Mr. Smith's suggestion ethical? Explain.
2. Is it ethical to discontinue the cash dividend? Explain.

Accepted Answer

1. There is no definite answer as to whe

Question 14

Owners' equity for a corporation is identified as each of the following except

Accepted Answer

A)  corporate capital. 
B)  paid-in capital. 
C)  partners' equity. 
D)  stockholders' equity. 
A)  corporate capital. 
B)  paid-in capital. 
C)  partners' equity. 
D)  stockholders' equity.

Question 15

Rubio Corporation began business by issuing 300000 shares of $5 par value common stock for $25 per share. During its first year the corporation sustained a net loss of $50000. The year-end balance sheet would show

Accepted Answer

A)  Common stock of $1500000. 
B)  Common stock of $7500000. 
C)  Total paid-in capital of $7450000. 
D)  Total paid-in capital of $1550000. 
A)  Common stock of $1500000. 
B)  Common stock of $7500000. 
C)  Total paid-in capital of $7450000. 
D)  Total paid-in capital of $1550000.

Question 16

The following data is available for Santos Service Corporation at December 31 2017: Common stock, par $ \$ 10 $ (authorized 100,000 shares) $\quad $ $ \$ 400,000 $
 Treasury Stock (at cost $ \$ 15 $ per share) $\quad $ $\quad $  $\quad $ $\quad $ $\quad $$\$27,000$
 Based on the data how many shares of common stock are outstanding?

Accepted Answer

A)  50000 
B)  40000 
C)  49880 
D)  38200 
A)  50000 
B)  40000 
C)  49880 
D)  38200

Question 17

The two ways that a corporation can be classified by ownership are

Accepted Answer

A)  publicly held and privately held. 
B)  stock and non-stock. 
C)  inside and outside. 
D)  majority and minority. 
A)  publicly held and privately held. 
B)  stock and non-stock. 
C)  inside and outside. 
D)  majority and minority.

Question 18

When a corporation has only one class of capital stock it is identified as preferred stock.

Accepted Answer

A) True 
 B)False

Question 19

In published annual reports subdivisions within the stockholders' equity section are seldom presented but additional information is frequently included in the footnotes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 20

Slater Roofing Company originally issued 6000 shares of $10 par value common stock for $180000 ($30 per share). Slater subsequently purchases 600 shares of treasury stock for $27 per share and resells the 600 shares of treasury stock for $29 per share. In the entry to record the sale of the treasury stock there will be a

Accepted Answer

A)  credit to Common Stock for $16200. 
B)  credit to Treasury Stock for $6000. 
C)  debit to Paid-In Capital in Excess of Par of $18000. 
D)  credit to Paid-In Capital from Treasury Stock for $1200. 
A)  credit to Common Stock for $16200. 
B)  credit to Treasury Stock for $6000. 
C)  debit to Paid-In Capital in Excess of Par of $18000. 
D)  credit to Paid-In Capital from Treasury Stock for $1200.

Exam 13: Corporations: Organization and Capital Stock Transactions

Which of the following statements is not considered a disadvantage of the corporate form of organization?

If a corporation has only one class of stock it is referred to as

Stock can be issued only in exchange for cash.

The par value of stock issued for noncash assets is never a factor in determining the cost of the assets received.

In the stockholders' equity section of the balance sheet the classification of capital stock consists of

Katy Hooper Inc. issued 6000 shares of no-par common stock with a stated value of $5 per share. The market price of the stock on the date of issuance was $14 per share. The entry to record this transaction includes a

The par value of common stock must always be equal to its market value on the date the stock is issued.

Which of the following represents the largest number of common shares?

Two classifications appearing in the paid-in capital section of the balance sheet are

Owners' equity for a corporation is identified as each of the following except

Rubio Corporation began business by issuing 300000 shares of $5 par value common stock for $25 per share. During its first year the corporation sustained a net loss of $50000. The year-end balance sheet would show

The two ways that a corporation can be classified by ownership are

When a corporation has only one class of capital stock it is identified as preferred stock.

In published annual reports subdivisions within the stockholders' equity section are seldom presented but additional information is frequently included in the footnotes to the financial statements.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

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