Exam 11: Proprietorships, Partnerships, and Corporations

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

Rockmont Corporation decides to issue a 15% stock dividend on 20,000 outstanding shares of $10 stated value common stock. The distribution is made at the time the market value of the stock is $50 a share. How will the entry to record this transaction affect the company's equity accounts?

All corporations are subject to extensive government regulation.

Versa Corporation had 25,000 shares of $10 par value common stock outstanding and declared a four-for-one stock split. How many new shares of stock would then be outstanding and what would be the par value of the new stock?

Blair Wilson is planning to invest in one of the following companies based on their average performance over the past five years, summarized below. If Blair is looking for a company that is likely to achieve rapid growth in revenues and profitability, which one should he choose?

Seattle Co. paid a $200,000 cash dividend to its shareholders on July 5, 2013, which was 2 months after Seattle declared the dividend.

What is meant by "double taxation?" Which type of organizational form is more likely to be subject to double taxation?

Prepare journal entries for the following transactions. a) Issued 6,000 shares of $25 par value preferred stock at $40 per share. b) Issued 40,000 shares of common stock with a $10 stated value for cash of $18 per share. c) Purchased 400 shares of treasury stock (common stock) at $20 per share. d) Resold 100 shares of the treasury stock at $24 per share.

Jasper, Inc. had issued and outstanding 250,000 shares of $8 par value common stock at January 1, 2013 with a retained earnings balance of $750,000. Jasper issued a 12% stock dividend to its common shareholders. At the time of the dividend the market value of the stock was $17 per share. Required: a) What is the total dollar amount of the stock dividend? b) Prepare the entry to record the stock dividend. c) How many shares are outstanding after the stock dividend?

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

The price-earnings ratio is calculated as:

Indicate whether each of the following statements is true or false. _____ a) An appropriation of retained earnings limits the amount available for dividends. _____ b) Appropriating retained earnings is considered an asset exchange transaction. _____ c) An appropriation is recorded as a debit to the appropriated retained earnings account and a credit to retained earnings. _____ d) One reason for an appropriation of retained earnings is that there may be restrictive covenants in credit agreements. _____ e) An appropriation has no effect on the accounting equation.

Indicate whether each of the following items is true or false. _____ a) Many successful corporations do not pay dividends to their stockholders. _____ b) Careful study of the financial statements will give investors the ability to predict future movements in the market price of a corporation's stock. _____ c) The price-earnings (P/E) ratio is computed by dividing the market price per share by the earnings per share. _____ d) As a general rule, the higher the P/E ratio, the greater is the optimism for future growth of the corporation. _____ e) The number of shares to purchase in order to attain "significant influence" of a corporation can readily be determined from the financial statements.

Laverne and Shirley started a partnership. Laverne invested $10,000 in the business and Shirley invested $16,000. The partnership agreement stipulated that profits would be divided as follows. Each partner would receive a 15% return on their invested capital with the remaining income being distributed equally between the two partners. Assuming that the partnership earned $19,000 during an accounting period, the amount of income assigned to the two partners would be:

On February 2, 2013, the Metro Art Supply Corporation issued 9,000 shares of no-par stock for $17 per share. Within two hours of the issue, the stock's price jumped on the UMSL stock exchange to $21 per share. Which of the following answers describes the effect of the February 2, 2013 transaction?

Landes 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?

When a corporation records a stock dividend, it debits Retained Earnings for the par value of the stock.

At the time that Kaplan Company issued a 2-for-1 stock split, the company had 1,000 shares of $6 par value common stock outstanding. Stockholders' equity also contained $15,000 of additional paid in capital and $22,000 of retained earnings. Immediately after the stock split,

Which of the following statements best describes the term "par value?"

Zirkle Company appropriated $15,000,000 of retained earnings for the purpose of building a new office building.