Exam 8: Proprietorships, Partnerships, and Corporations

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. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ The Edmonds Corporation began operations on January 1, 2014 by issuing 10,000 shares of no-par stock for $20 per share. Indicate the effects of this transaction on the financial statements. Assets Liabilities Equity Revenues Expenses Net Income Cash Flow

Which of the following terms designates the number of shares of a corporation's stock currently held by stockholders?

Grant Corporation declared a 2-for-1 stock split when it had 12,000 shares of $5 par value common stock outstanding. If the market price of the stock had been $20 a share before the split, the par value, number of shares and approximate market value after the split would be: Par Value No. of Shares Market Value A) \ 2.50 24,000 \ 10.00 B) \ 2.50 24,000 \ 5.00 C) \ 2.50 12,000 \ 10.00 D) \ 5.00 24,000 \ 20.00

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. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ Wilbur Company reissued 200 shares of treasury stock. The treasury stock had been purchased by Wilbur at $40 per share. The shares were reissued at a price of $45 per share. Assets Liabilities Equity Revenues Expenses Net Income Cash Flow

Indicate whether each of the following statements about stockholders' equity is true or false. 1. A 2-for-1 stock split probably will double the monetary value of an investor's holdings on the date the split takes effect 2. The declaration and distribution of a stock dividend reduces retained earnings 3. The balance in the treasury stock account increases total stockholders' equity 4. If treasury stock that had been acquired by a company for $50 per share is resold for $60 per share, total assets and stockholders' equity will increase 5. Preferred stock of some corporations can be converted into common stock

Laverne and Shirley started a partnership. Laverne invested $4,000 in the business and Shirley invested $6,000. The partnership agreement stipulated that profits would be divided as follows. Each partner would receive a 10% return on their invested capital with the remaining income being distributed equally between the two partners. Assuming that the partnership earned $4,500 during an accounting period, the amount of income assigned to the two partners would be:

The following items appeared on the financial statements of Moore, Inc. on December 31, 2014: Common stock, $\$ 100$ par 4,000 shares authorized, 1,000 shares issued and outstanding \ 100,000 Retained earnings 685,000 On September 10, 2014, when the market value of the Moore stock was $150, the company declared and distributed a 10% stock dividend. Indicate whether each of the following statements is true or false. 1. Total equity would not be affected by the stock dividend 2. Total paid-in capital would be $115,000 after the dividend had been distributed 3. Cash flow from financing activities would decrease by $15,000 as a result of the stock dividend 4. A stock dividend is an asset use transaction 5. Retained earnings would increase by $15,000 as a result of the stock dividend

On July 1, 2014, Gustafson Company appropriated retained earnings in the amount of $18,000 for a future remodeling project. On June 30, 2014, the balance of Retained Earnings was $41,400 and the Cash balance was $21,600. Which of the following answers shows the effect of the appropriation of retained earnings on the financial statements?

Indicate whether each of the following statements is true or false. 1. An appropriation of Retained Earnings limits the amount available for dividends 2. An appropriation of Retained Earnings increases the total amount of Retained Earnings 3. An appropriation of Retained Earnings has no effect on the income statement 4. One reason for an appropriation of Retained Earnings is that there may be restrictive covenants in debt agreements 5. Appropriating Retained Earnings is considered an asset exchange transaction

Flynn Company issued 2,000 shares of $10 par value common stock at a market price of $16. As a result of this accounting event, total paid-in capital would

Bridge Corporation issued a 15% stock dividend on 20,000 outstanding shares of $10 stated value common stock. The distribution was made at the time the market value of the stock was $50 a share. How did this transaction affect the company's total stockholders' equity?

A corporation is a legal entity created by the authority of a state government, separate and distinct from its owners.

Preferred stockholders' claims to a corporation's assets take precedence over the claims of some creditors in the event of liquidation of the corporation.

Discuss possible reasons why a corporation may establish an appropriation of retained earnings.

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

Which describes the stockholders' equity account created when a corporation purchases its own stock and holds it for reissue?

Griggs Company reissued 100 shares of its treasury stock. Griggs had purchased the stock for $25 per share and reissued it for $35 per share. Select the answer that accurately reflects how the reissue of the treasury stock would affect Griggs' financial statements.

Discuss some of the information items normally included in a corporation's articles of incorporation.

Which of the following terms designates the maximum number of shares that a corporation may issue?

Which of the following is a negative or contra stockholders' equity account?