Exam 11: Proprietorships,partnerships,and Corporations

Indicate whether each of the following statements about treasury stock is true or false. _____ a)One reason for a corporation to buy its own stock is to boost its net income when treasury stock is reissued for a higher price. _____ b)Corporations may buy back their own stock (treasury stock)to avoid hostile takeovers. _____ c)Purchasing treasury stock reduces the number of issued shares. _____ d)The treasury stock account is classified as a negative equity account. _____ e)If treasury stock is reissued for an amount lower than its purchase price,retained earnings is increased.

Chadwick Associates retained $850,000 of net income in the business in 2016.If $75,000 was appropriated to satisfy the restrictive covenant of a loan agreement,what are the financial statements effects of the appropriation?

The most frequently reported measure of a company's value is earnings per share.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. -Jack Grimes,who had held 12% of Preston Company's outstanding common stock,agreed to purchase another 8% of Preston Company's outstanding common stock from Todd Barbour,another major stockholder of Preston's.Indicate the effect of this event on Preston's financial statements.

When the Common Stock account is disclosed on the balance sheet,it is reported at:

Blair Scott started a sole proprietorship by depositing $75,000 cash in a business checking account.During the accounting period the business borrowed $30,000 from a bank,earned $18,000 of net income,and Scott withdrew $12,000 cash from the business.Based on this information,at the end of the accounting period Scott's capital account contained a balance of:

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. -The stock of Atlantic Oil Co.was trading at $14 per share on March 27 when the company announced that it had recently discovered a large oil reserve.The stock price immediately went up to $28 per share.The company had 10,000,000 shares outstanding.Indicate the effects of this discovery on Atlantic's financial statements.

Treasury Stock is an equity account with a normal credit balance.

On January 1,2016,the organizers of the Fredonia Corporation obtained their charter authorizing 400,000 shares of $2 par common stock.Fredonia issued 30,000 shares of $2 par common stock for $8 per share.During 2016,the corporation earned $820,000 in cash revenue and paid $700,000 in cash expenses,not including income tax.The company declared and paid cash dividends totaling $28,000.Fredonia Corporation is in the 30% tax bracket.Using the above information,prepare an income statement and a balance sheet for the Fredonia Corporation.

Flagler Corporation shows a total of $660,000 in its Common Stock account and $1,600,000 in its Paid-in Capital Excess account.The par value of Flagler's common stock is $8.How many shares of Flagler stock have been issued?

Jalisco,Inc. ,had issued and outstanding 250,000 shares of $8 par value common stock at January 1,2016 with a retained earnings balance of $750,000.Jalisco issued a 12% stock dividend to its common shareholders.At the time of the dividend the market value of the stock was $17 per share. Required: a)What is the total dollar amount of the stock dividend? b)Prepare the entry to record the stock dividend. c)How many shares are outstanding after the stock dividend?

Indicate whether each of the following statements is true or false. _____ a)An appropriation of retained earnings limits the amount available for dividends. _____ b)Appropriating retained earnings is considered an asset exchange transaction. _____ c)An appropriation is recorded as a debit to the appropriated retained earnings account and a credit to retained earnings. _____ d)One reason for an appropriation of retained earnings is that there may be restrictive covenants in credit agreements. _____ e)An appropriation has no effect on the accounting equation.

Garber Corporation had 20,000 shares of $12 par value common stock outstanding and declared a four-for-one stock split.How many new shares of stock would then be outstanding and what would be the par value of the new stock?

Will the number of shares of stock issued and the number of shares of stock outstanding always be the same? Why or why not?

Discuss a few of the characteristics of sole proprietorships,partnerships and corporations.

At the time that Kirby Company issued a 2-for-1 stock split,the company had 5,000 shares of $6 par value common stock outstanding.Stockholders' equity also contained $15,000 of additional paid in capital and $22,000 of retained earnings.Immediately after the stock split,

When a corporation records a stock dividend,it debits Retained Earnings for the par value of the stock.

Discuss a few common reasons for increases in the market price of a corporation's common stock.

Napoli Industries had net income for the year 2016 of $650,000.Napoli had an average number of shares outstanding at the end of the year of 500,000 shares.The market price of Napoli's stock on January 1,2016 was $20 per share.On December 31,2016,the market price was $22 per share.The price-earnings ratio for Napoli at year end is closest to:

An appropriation of retained earnings places a limit on the amount of dividends a corporation can declare.