Exam 13: Accounting for Corporations

On June 1,20x5,Jomax Corporation had 60,000 shares of $10 par value common stock outstanding.On June 2,20x5,Jomax declared a 40 percent stock dividend to be distributed on July 5,20x5,to shareholders of record on June 15,20x5.What amount of retained earnings should be transferred to contributed capital because of this dividend?

Define outstanding stock.

Willow Corporation has retained earnings of $320,000.It has 5,000 shares of 6 percent,$100 par value preferred stock outstanding that is callable at 102.The preferred stock is cumulative,and one year of dividends is in arrears.It also has 10,000 shares of $50 par value common stock outstanding.Assume all stock is issued at par.The book value of each share of preferred stock is

Financing a business with common stock is more risky than financing it with bonds.

The board of directors carries out the day-to-day operations of the business.

Treasury shares are shares that are authorized but unissued.

Which of the following statements is descriptive of common stock?

The following facts pertain to the stockholders' equity section of the balance sheet of Charlotte Corporation: During 20x5,Charlotte declared and distributed a stock dividend.Also during 20x5,Charlotte declared and paid cash dividends of $26,000.There were no changes in the number of shares of stock issued and outstanding during the period except for the change caused by the stock dividend.Calculate the amount of net income reported by Charlotte for 20x5.

If there is no change in the number of shares authorized and issued from one year to the next,but there is a change in the number of shares outstanding on those same dates,how would you explain that change?

Dividends in arrears pertain only to cumulative preferred stock.

The account Common Stock Distributable is classified as a current liability.

The number of outstanding shares should exceed the number of authorized shares.

The sale of shares in a corporation by one stockholder to another does not affect the total capital of the corporation.

No entry is required on the date of payment for a cash dividend.

The purpose of a statement of stockholders' equity is to

In computing book value per share of common stock,common stock distributable is included in the divisor.

The price/earnings (P/E)ratio is a measure of investors' confidence in a company's future.

Underwriters typically charge 1 percent of the selling price to guarantee the sale of initial public offerings of stock.

When the dividends yield is relatively low,investors must expect some of their return to come from increases in the price of the shares.

Treasury stock usually is recorded at cost when purchased.