Question 1

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

Accepted Answer

The answer of Explain how to compute book value per...

Question 2

If a corporation receives assets other than cash in exchange for stock, it records the assets received at their market value as of the date of the transaction.

Accepted Answer

A) True 
 B)False

Question 3

Djarleen Company has 10,000 shares of $10 par preferred stock, which were issued at par. It also has 250,000 shares of common stock outstanding, and its total stockholders' equity equals $4,000,000. The book value per common share is:

Accepted Answer

A)  $10.00. 
B)  $40.00. 
C)  $15.60. 
D)  $16.67. 
E)  $16.00.

Question 4

A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share. The entry to record this transaction would be:

Accepted Answer

A)  Debit Cash $27,500; credit Paid-in Capital in Excess of Par Value, Common Stock $2,500; credit Common Stock $25,000. 
B)  Debit Common Stock $27,500; credit Cash $27,500. 
C)  Debit Cash $27,500; credit Common Stock $27,500. 
D)  Debit Treasury Stock $27,500; credit Cash $27,500. 
E)  Debit Treasury Stock $2,500; debit Paid-in Capital in Excess of Par Value, Treasury Stock $25,000; credit Common Stock $27,500.

Question 5

In many states, the minimum amount that stockholders must contribute to the corporation, and which is intended to protect the creditors of the corporation, is called the:

Accepted Answer

A)  Minimum legal capital. 
B)  Par value of preferred. 
C)  Stated value. 
D)  Premium capital. 
E)  Working capital.

Question 6

A large stock dividend only occurs when a distribution of more than 50% of previously outstanding shares is issued.

Accepted Answer

A) True 
 B)False

Question 7

Small stock dividends are recorded at par or stated value.

Accepted Answer

A) True 
 B)False

Question 8

The stockholders' equity section of a corporation's balance sheet follows:
 (1) Assuming that no dividends are in arrears, compute the book values per preferred share and per common share.
(2) Assuming that one year of cumulative preferred dividends is in arrears, compute the book values per preferred share and per common share.

Accepted Answer

The answer of The stockholders' equity section of a corporation's...

Question 9

A company issued 60 shares of $100 par value common stock for $7,000 cash. The total amount of paid-in capital in excess of par is:

Accepted Answer

A)  $600. 
B)  $7,000. 
C)  $100. 
D)  $6,000. 
E)  $1,000.

Question 10

Stock not assigned a value per share by the corporate charter, allowing it to be issued at any price without the possibility of a minimum legal capital deficiency, is called___________ .

Accepted Answer

The answer of Stock not assigned a value per share...

Question 11

Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. $\begin{array}{ll}
&\text { Dividend Declared }\\ 
\text { year 1 } & \$ 2,000 \
\text { year 2 } & \$ 6,000 \
\text { year 3 } & \$ 32,000
\end{array}$

- 
The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Accepted Answer

A)  $10,000 preferred; $30,000 common. 
B)  $12,000 preferred; $28,000 common. 
C)  $5,000 preferred; $35,000 common. 
D)  $15,000 preferred; $25,000 common. 
E)  $11,000 preferred; $29,000 common.

Question 12

A stock split is the distribution of additional shares of stock to stockholders according to their percent of ownership.

Accepted Answer

A) True 
 B)False

Question 13

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

Accepted Answer

A) True 
 B)False

Question 14

On September 20, Fletcher Corporation issued 25,000 shares of no-par common stock for equipment having a market value of $85,000. Prepare the general journal entry to record this transaction.

Accepted Answer

The answer of On September 20, Fletcher Corporation issued 25,000...

Question 15

The board of directors of a corporation:

Accepted Answer

A)  Do not have the power to bind the corporation to contracts, due to lack of mutual agency. 
B)  Are elected by the corporate registrar. 
C)  Are responsible for and have final authority for managing corporate activities. 
D)  Are responsible for day-to-day operations of the business. 
E)  May not also be executive officers of the corporation, due to the separate entity principle.

Question 16

On July 1, a corporation issued 15,000 shares of no-par common stock with a stated value of $3 per share in exchange for a tract of land having a market value of $215,000. Prepare the general journal entry to record this transaction.

Accepted Answer

The answer of On July 1, a corporation issued 15,000...

Question 17

If a company resells treasury stock below the acquisition cost, a loss from the sale of treasury stock is recorded.

Accepted Answer

A) True 
 B)False

Question 18

Explain how to compute dividend yield and discuss how it is used in analysis of a company's financial condition.

Accepted Answer

The answer of Explain how to compute dividend yield and...

Question 19

A company issued 70 shares of $30 par value preferred stock for $4,000 cash. The journal entry to record the issuance is:

Accepted Answer

A)  Debit Cash $4,000; credit Preferred Stock $4,000. 
B)  Debit Cash $2,100; credit Preferred Stock $2,100. 
C)  Debit Preferred Stock $2,100, debit Investment in Preferred Stock $1,900; credit Cash $4,000. 
D)  Debit Cash $4,000; credit Paid-in Capital in Excess of Par Value, Preferred Stock $1,900, credit Preferred Stock $2,100. 
E)  Debit Investment in Preferred Stock $2,100; credit Cash $2,100.

Question 20

Retained earnings generally consist of a company's cumulative net income less any net losses and dividends declared since its inception.

Accepted Answer

A) True 
 B)False

Exam 13: Accounting for Corporations

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

If a corporation receives assets other than cash in exchange for stock, it records the assets received at their market value as of the date of the transaction.

Djarleen Company has 10,000 shares of $10 par preferred stock, which were issued at par. It also has 250,000 shares of common stock outstanding, and its total stockholders' equity equals $4,000,000. The book value per common share is:

A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share. The entry to record this transaction would be:

In many states, the minimum amount that stockholders must contribute to the corporation, and which is intended to protect the creditors of the corporation, is called the:

A large stock dividend only occurs when a distribution of more than 50% of previously outstanding shares is issued.

Small stock dividends are recorded at par or stated value.

A company issued 60 shares of $100 par value common stock for $7,000 cash. The total amount of paid-in capital in excess of par is:

Stock not assigned a value per share by the corporate charter, allowing it to be issued at any price without the possibility of a minimum legal capital deficiency, is called___________ .

A stock split is the distribution of additional shares of stock to stockholders according to their percent of ownership.

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

On September 20, Fletcher Corporation issued 25,000 shares of no-par common stock for equipment having a market value of $85,000. Prepare the general journal entry to record this transaction.

The board of directors of a corporation:

On July 1, a corporation issued 15,000 shares of no-par common stock with a stated value of $3 per share in exchange for a tract of land having a market value of $215,000. Prepare the general journal entry to record this transaction.

If a company resells treasury stock below the acquisition cost, a loss from the sale of treasury stock is recorded.

Explain how to compute dividend yield and discuss how it is used in analysis of a company's financial condition.

A company issued 70 shares of $30 par value preferred stock for $4,000 cash. The journal entry to record the issuance is:

Retained earnings generally consist of a company's cumulative net income less any net losses and dividends declared since its inception.