Exam 11: Corporations: Organization, Stock Transactions, and Dividends

The authorized stock of a corporation

On April 1, 10,000 shares of $5 par common stock were issued at $22, and on April 7, 5,000 shares of $50 par preferred stock were issued at $104. Journalize the entries for April 1 and 7.

Which of the following is not classified as paid-in capital on the balance sheet?

If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are held as treasury stock, a cash dividend of $1 per share would amount to $15,000.

The declaration of a cash dividend decreases a corporation's stockholders equity and decreases its assets.

Which one of the following would not be considered an advantage of the corporate form of organization?

On April 10, a company acquired land in exchange for 1,000 shares of $20 par common stock with a current market price of $73. Journalize this transaction.

The par value per share of common stock represents

Double taxation is a disadvantage of a corporation because the same party has to pay taxes twice on the income.

A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be:

The amount of capital paid in by the stockholders of the corporation is called legal capital.

Earnings per share

Carmen Company a publicly traded company with preferred and common stock issued. As of January 1st, it had 50,000 shares of $100 par, 2% preferred stock outstanding and 250,000 shares of $10 par common stock outstanding. (a) On January 31st, the Board of Directors issues a requirement to purchase 5,000 shares of its common stock at market price. The shares are purchased at a market price of $22 per share. Journalize the purchase utilizing the cost concept. (b) On March 15th, Carmen declares a dividend on preferred stock of $2.75 per share. The date of record is March 25th and the date of payment is March 31st. Journalize these events. (c) On December 1st, Carmen declares a cash dividend on common stock of $0.12 per share. The date of record is December 15th and the date of payment is December 21st. Journalize these events. (d) On December 27th the board orders that 2,500 shares of treasury stock be sold. The sale price is $25 per share. Journalize this event.

A corporation issues 2,500 shares of common stock for $ 45,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for

On May 10, a company issued for cash 1,500 shares of no-par common stock (with a stated value of $2) at $14, and on May 15, it issued for cash 2,000 shares of $15 par preferred stock at $58. Journalize the entries for May 10 and 15, assuming that the common stock is to be credited with the stated value.

The Dayton Corporation began the current year with a retained earnings balance of $32,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $7,000. Compute the year end retained earnings balance.

The balance in Retained Earnings at the end of the period is created by closing entries.

While some businesses have been granted charters under state laws, most businesses receive their charters under federal laws.

Prepare entries to record the following:

When a corporation issues stock at a premium, it reports the premium as an other income item on the income statement.