Exam 13: Accounting for Corporations

Legal capital of a corporation is the maximum amount that can be reported as contributed capital.

Preferred stock is considered the residual equity of a corporation.

Firehawk Corporation had net income of $560,000 in 20x5 and paid dividends of $440,000 on 200,000 shares of outstanding common stock.Total stockholders' equity at the end of 20x5 was $2,060,000 and the market price for each share of Firehawk's stock was $58 throughout 20x5.Additionally,the company paid preferred dividends of $2.40 per share during 20x5.Based on this information,what is the dividend yield on Firehawk's stock?

According to generally accepted accounting principles,treasury stock usually should be recorded at

When no-par common stock has a stated value,the stated value of the shares issued normally is considered the legal capital of the corporation.

An advantage of the corporate form of business is

Legal capital is a descriptive phrase for

Book value per share of stock represents the amount the shareholder will receive per share if the company is sold or liquidated.

All of the following are stockholders' equity accounts except

Callable preferred stock is preferred stock that may be redeemed or retired at the option of the issuing corporation.

Retained earnings are a component of contributed capital.

Although a corporation may have sufficient cash and retained earnings to pay a dividend,its board of directors may not declare dividends.Name at least two reasons why a board of directors might not declare dividends.

Which of the following is not true about a 35 percent stock dividend?

A dividend that represents a return to the stockholders of a part of their paid-in capital rather than a distribution out of retained earnings is called a liquidating dividend.

Use the following information to answer the question below. On January 1,20x5,Falcon Corporation had 40,000 shares of $10 par value common stock issued and outstanding.All 40,000 shares had been issued in a prior period at $17 per share.On February 1,20x5,Falcon purchased 3,100 shares of treasury stock for $19 per share and later sold the treasury shares for $26 per share on March 2,20x5. What amount of gain due to these treasury stock transactions should be reported on the income statement for the year ended December 31,20x5 ?

Treasury stock is considered a reduction in stockholders' equity,not a purchase of assets .

How is book value per share interpreted for an investor who owns one share of a company's stock? Is book value equal to the amount this stockholder would receive if the company were sold or liquidated? Why or why not?

A stock dividend exceeding 20 to 25 percent is properly treated as a stock split.

The effects on individual contributed capital accounts of a conversion of preferred stock to common stock during the period are disclosed on the statement of stockholders' equity.

The Additional Paid-in Capital account normally arises in the accounting records when