Question 1

Retained earnings

Accepted Answer

A)  is unique to the corporate form of business. 
B)  is an optional account in the partnership form of business. 
C)  reflects cash paid in by stockholders to date. 
D)  is closed at the end of the year. 
A)  is unique to the corporate form of business. 
B)  is an optional account in the partnership form of business. 
C)  reflects cash paid in by stockholders to date. 
D)  is closed at the end of the year.

Question 2

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

Accepted Answer

A)  general and limited. 
B)  profit and not-for-profit. 
C)  state and federal. 
D)  publicly held and privately held. 
A)  general and limited. 
B)  profit and not-for-profit. 
C)  state and federal. 
D)  publicly held and privately held.

Question 3

Dividends are declared out of

Accepted Answer

A)  Capital Stock. 
B)  Paid-in Capital in Excess of Par Value. 
C)  Retained Earnings. 
D)  Treasury Stock. 
A)  Capital Stock. 
B)  Paid-in Capital in Excess of Par Value. 
C)  Retained Earnings. 
D)  Treasury Stock.

Question 4

A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a

Accepted Answer

A)  corporation is organized for the purpose of making a profit. 
B)  corporation is subject to more federal and state government regulations. 
C)  corporation is an accounting economic entity. 
D)  corporation's temporary accounts are closed at the end of the accounting period. 
A)  corporation is organized for the purpose of making a profit. 
B)  corporation is subject to more federal and state government regulations. 
C)  corporation is an accounting economic entity. 
D)  corporation's temporary accounts are closed at the end of the accounting period.

Question 5

Jenkins Corporation has the following accounts at December 31: Common Stock, $10 par 7,000 shares issued, $70,000; Paid-in Capital in Excess of Par Value $10,000; Retained Earnings $45,000; and Treasury Stock-Common, 500 shares, $10,000. Prepare the stockholders' equity section of the balance sheet.

Accepted Answer

The answer of Jenkins Corporation has the following accounts at...

Question 6

A corporation has a separate __________________________ apart from its owners.

Accepted Answer

The answer of A corporation has a separate __________________________ apart...

Question 7

Stockholders elect the _______________, who in turn hire the ______________ of the company who have day to day responsibility for running the corporation.

Accepted Answer

board of d

Question 8

The sale of common stock below par

Accepted Answer

A)  is a common occurrence in most states. 
B)  is not permitted in most states. 
C)  is a practice that most stockholders encourage. 
D)  requires that a liability be recorded for the difference between the sales price and the par value of the shares. 
A)  is a common occurrence in most states. 
B)  is not permitted in most states. 
C)  is a practice that most stockholders encourage. 
D)  requires that a liability be recorded for the difference between the sales price and the par value of the shares.

Question 9

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

Accepted Answer

A)  the par value is automatically $1 per share. 
B)  the entire proceeds are considered to be legal capital. 
C)  there is no legal capital. 
D)  the corporation is automatically in violation of its state charter. 
A)  the par value is automatically $1 per share. 
B)  the entire proceeds are considered to be legal capital. 
C)  there is no legal capital. 
D)  the corporation is automatically in violation of its state charter.

Question 10

Which of the following statements reflects the transferability of ownership rights in a corporation?

Accepted Answer

A)  If a stockholder decides to transfer ownership, he must transfer all of his shares. 
B)  A stockholder may dispose of part or all of his shares. 
C)  A stockholder must obtain permission from the board of directors before selling shares. 
D)  A stockholder must obtain permission from at least three other stockholders before selling shares. 
A)  If a stockholder decides to transfer ownership, he must transfer all of his shares. 
B)  A stockholder may dispose of part or all of his shares. 
C)  A stockholder must obtain permission from the board of directors before selling shares. 
D)  A stockholder must obtain permission from at least three other stockholders before selling shares.

Question 11

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 12

Prepare the necessary journal entry for each of the following transactions for Renfro Corporation.
(a) Issued 2,000 shares of its $10 par value common stock for $16 per share.
(b) Issued 5,000 shares of its stock for land advertised for sale at $80,000. Renfro's stock is actively traded at a market price of $15 per share.

Accepted Answer

The answer of Prepare the necessary journal entry for each...

Question 13

The stockholders' equity section of Linton Corporation at December 31 is as follows.   
Instructions
From a review of the stockholders' equity section, answer the following questions.
(a) How many shares of common stock are outstanding?
(b) Assuming there is a stated value, what is the stated value of the common stock?
(c) What is the par value of the preferred stock?
(d) If the annual dividend on preferred stock is $18,000, what is the dividend rate on preferred stock?
(e) If dividends of $36,000 were in arrears on preferred stock, what would be the balance in Retained Earnings?

Accepted Answer

(a) Common stock outstanding is 295,000

Question 14

Name at least three factors that influence the market value of stock.
2. Corporations acquire treasury stock for a variety of purposes. Name three reasons why treasury stock may be acquired by a corporation.

Accepted Answer

1. Factors that influence the market val

Question 15

Place each of the items listed below in the appropriate subdivision of the stockholders' equity section of a balance sheet.
Common stock, $10 stated value
Retained earnings
8% Preferred stock, $100 par value
Paid-in capital in excess of par value
Paid-in capital in excess of stated value
Treasury stock-Common
Paid-in capital from treasury stock
Stockholders' equity
Paid-in capital
Capital stock
Additional paid-in capital
Total additional paid-in capital
Total paid-in capital
Retained earnings
Total paid-in capital and retained earnings
Total stockholders' equity

Accepted Answer

The answer of Place each of the items listed below...

Question 16

An inexperienced accountant for Duran Corporation made the following entries.   
Instructions
On the basis of the explanation for each entry, prepare the entry that should have been made for the transactions.

Accepted Answer

The answer of An inexperienced accountant for Duran Corporation made...

Question 17

On May 1, Hite Corporation purchased 2,000 shares of its $10 par value common stock at a cash price of $13/share. On July 15,900 shares of the treasury stock were sold for cash at $15/share.
Instructions
Journalize the two transactions.

Accepted Answer

The answer of On May 1, Hite Corporation purchased 2,000...

Question 18

Information that is not generally reported for each class of stock on the balance sheet is

Accepted Answer

A)  the market value. 
B)  the par value. 
C)  shares authorized. 
D)  shares issued. 
A)  the market value. 
B)  the par value. 
C)  shares authorized. 
D)  shares issued.

Question 19

If preferred stock is cumulative, the

Accepted Answer

A)  preferred dividends not declared in a given year are called dividends in arrears. 
B)  preferred stockholders and the common stockholders receive equal dividends. 
C)  preferred stockholders and the common stockholders receive the same total dollar amount of dividends. 
D)  common stockholders will share in the preferred dividends. 
A)  preferred dividends not declared in a given year are called dividends in arrears. 
B)  preferred stockholders and the common stockholders receive equal dividends. 
C)  preferred stockholders and the common stockholders receive the same total dollar amount of dividends. 
D)  common stockholders will share in the preferred dividends.

Question 20

S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $10,000 by issuing 5,000 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 $1.80 per share. Given this information, the journal entry for E. Corp. to record this transaction is:

Accepted Answer

A)  Legal Expense 9,000 Common Stock 9,000 
B)  Legal Expense 10,000 Common Stock 10,000 
C)  Legal Expense 10,000 Common Stock 5,000
Paid-in Capital in Excess of Par - Common 5,000 
D)  Legal Expense 9,000 Common Stock 5,000
Paid-in Capital in Excess of Par - Common 4,000 
A)  Legal Expense 9,000 Common Stock 9,000 
B)  Legal Expense 10,000 Common Stock 10,000 
C)  Legal Expense 10,000 Common Stock 5,000
Paid-in Capital in Excess of Par - Common 5,000 
D)  Legal Expense 9,000 Common Stock 5,000
Paid-in Capital in Excess of Par - Common 4,000

Exam 13: Corporations: Organization and Capital Stock Transactions

Retained earnings

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

Dividends are declared out of

A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a

A corporation has a separate __________________________ apart from its owners.

Stockholders elect the _______________, who in turn hire the ______________ of the company who have day to day responsibility for running the corporation.

The sale of common stock below par

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

Which of the following statements reflects the transferability of ownership rights in a corporation?

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

Name at least three factors that influence the market value of stock. 2. Corporations acquire treasury stock for a variety of purposes. Name three reasons why treasury stock may be acquired by a corporation.

An inexperienced accountant for Duran Corporation made the following entries. Instructions On the basis of the explanation for each entry, prepare the entry that should have been made for the transactions.

On May 1, Hite Corporation purchased 2,000 shares of its $10 par value common stock at a cash price of $13/share. On July 15,900 shares of the treasury stock were sold for cash at $15/share. Instructions Journalize the two transactions.

Information that is not generally reported for each class of stock on the balance sheet is

If preferred stock is cumulative, the

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 Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

Stockholders elect the _, who in turn hire the of the company who have day to day responsibility for running the corporation.