Exam 13: Corporations

Preferred Stock is included in the stockholders' equity section of the balance sheet and is often listed after Common Stock.

On the income statement,earnings per share is shown for income from continuing operations.

Jameson Company earned net income of $75,000 during the year ended December 31,2018.On December 20,Jameson declared the annual cash dividend on its 8% noncumulative preferred stock (par value,$150,000)and a $0.50 per share cash dividend on its common stock (45,000 shares).Jameson then paid the dividends on January 10,2019. Prepare the journal entries to record the declaration and the distribution of the dividends.Explanations are not required.

Dividends can be paid in the form of cash,stock,or other property.

Most well-known companies are corporations and tend to be large multinational businesses.

If preferred stock is issued for an amount above the par value,the amount of the par value times the number of shares issued is credited to Paid-In Capital in Excess of Par-Preferred.

Sherry,Inc.had 140,000 shares of $5 par value common stock issued and outstanding as of December 15,2018.The company is authorized to issue 1,000,000 common shares.On December 15,2018,Sherry declared a 40% stock dividend when the market value for its common stock was $9 per share.The stock was issued on Dec.30. Prepare the journal entries to record the declaration and distribution of the stock dividend.Explanations are not required.Compute the total shares after the dividend.

Following is a list of advantages and disadvantages of the corporate form of business.Identify each characteristic as either an advantage (A)or a disadvantage (D). Corporate Characteristic Advantage (A) or Disadvantage (D) Entity can raise more money than a partnership or sole proprietor. Startup costs are higher than other business forms. Stockholders' liability is limited. There is no mutual agency among the stockholders and the corporation.

When a corporation issues stock at par value,the Cash account is debited and the Common Stock account is credited for an amount equal to the number of shares issued times the par value per share.

A corporation's income statement includes some unique items that do not often apply to smaller businesses.

The journal entry to record the purchase of treasury stock includes a debit to Treasury Stock - Common for the shares purchased multiplied by the par or stated value of the stock.

The price/earnings ratio measures the value that the stock market places on $1 of a company's earnings.

When stock is issued for assets other than cash,the transaction is always recorded at the market value of the stock issued.

A sale of treasury stock at its cost increases assets and increases equity.

Nathan Corporation's accounting records include the following items for the year ending December 31,2018: Gain on Sale of Equipment \ 12,000 Gain on Discontinued Operations \ 75,000 Loss on Disposal of Equipment 5,000 Sales 650,000 Cost of Goods Sold 285,000 Operating Expenses 120,000 The income tax rate for the company is 45%.The company had 15,000 shares of common stock outstanding during 2018 and no preferred stock.Prepare Nathan's income statement for the year ending December 31,2018.Show how Nathan reports EPS data on its 2018 income statement.

When a corporation retires its shares of treasury stock,the stock certificates are canceled.

Budget Office Supply Corporation completed the following stock issuance transactions: Mar. 28 Issued 5,000 shares of \ 4 stated value common stock for cash of \ 20 per share May 1 Received merchandise inventory with a market value of \ 46,000 In exchange for 2,000 shares of the \ 4 stated value common May 1 May 14 Issued 450 shares of 5\%,\ 20 par value preferred stock for \ 50 per share Prepare the journal entries to record these transactions.Explanations are not required.

Which of the following occurs when a corporation's board of directors declares a 10% stock dividend?

From its inception through the year of 2017,First Mart,Inc.was profitable and made strong dividend payments each year.In the year 2018,First Mart had major losses and paid no dividends.In 2019,the company started making large profits again,and they were able to pay dividends to all shareholders-both common and preferred.There are 2000 shares of cumulative,10% preferred stock outstanding.The preferred stock has a par value of $100.What is the total amount of dividends that should be paid to the preferred stockholders in December,2019?

When a company has issued both preferred and common stock,the common stockholders receive their dividends first.