Exam 8: Proprietorships, partnerships, and Corporations

Which of the following statements historically described the term "par value?"

Ransom Corporation issued 10,000 shares of $5 par common stock for $22 per share.As a result of this transaction,Ransom's legal capital increased by $50,000.

Which of the following is not considered an advantage of the corporate form of business organization?

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:

What effect will the declaration and distribution of a stock dividend have on net income and cash flows?

For 2012,the Hilary Corporation had beginning and ending Retained Earnings balances of $198,054 and $231,000,respectively.Also during 2012,the corporation declared and paid cash dividends of $29,000 and issued stock dividends valued at $16,000.Assuming that no other items affected Retained Earnings and that total expenses were $32,916,what was the amount of revenues for 2012?

The Garza Company was started on January 1,2012 as a sole proprietorship.The initial investment from J.Garza,the owner,was $40,000.During 2012,the business earned $30,000 in cash revenue and paid $20,000 in cash expenses.Ms.Garza withdrew from the business $2,000 for her personal use.Using the above information,prepare an income statement,a capital statement,and a balance sheet for the Garza Company.

Which of the following statements about the Treasury Stock account is correct?

A 10% preferred stock dividend is declared.The declaration and subsequent issuance do/does

According to some studies,the Sarbanes-Oxley Act of 2002 has had a negative effect on some public companies.Describe the negative result.

What is treasury stock?

In 2012,Wagner Associates appropriated $65,000 of retained earnings to satisfy the restrictive covenant of a loan agreement.What are the financial statement effects of the appropriation?

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

The number of shares of treasury stock held by a corporation would be considered to be neither issued nor outstanding.

On December 31,2012,before closing the accounts,Rampart Corporation had a balance in Retained Earnings of $30,000.Rampart's net income for the year was $12,000.On that date,the board of directors approved an appropriation of retained earnings in the amount of $10,000 because the company planned to expand its facilities.The corporation had 1,000 shares of $10 par common stock outstanding and a balance in Paid in Capital in Excess of Par Value of $18,000. Required: a)Indicate the effect of the appropriation of retained earnings on the financial statements. b)What effect did the appropriation of retained earnings have on total stockholders' equity? c)Prepare the Stockholder's Equity section of the Rampart Corporation's Balance sheet as of December 31,2012.

During 2012,the Hartnett Corporation and the Chapel Corporation reported net incomes of $100,000 and $250,000 respectively.Both companies had 200,000 shares of common stock issued and outstanding.At December 31,2012,the market price per share of Hartnett's stock was $31 and Chapel's' stock was $35. Required: a)Calculate the price-earnings ratio for each company. b)Based on the price-earnings ratios computed in part (a),which company do investors believe has more potential for future income growth? State your reason.

What is the meaning of "par value" of stock?

Corporations are more heavily regulated by governments than are sole proprietorships and partnerships.

On January 12,2012,the Picard Corporation issued 750 shares of $12 par-value common stock for $15 per share.Which of the following answers describes the effect of the January 12,2012 transaction?

Liu Corporation's balance sheet reflected the following information. Assuming all the stock was issued in a single transaction,what was the issue price per share of the stock?