Question 1

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

Accepted Answer

A)  no effect on net income or cash flows 
B)  no effect on net income, decrease cash flows 
C)  decrease net income, decrease cash flows 
D)  increase net income, no effect on cash flows

Question 2

The issuance of a stock dividend will

Accepted Answer

A)  not affect total equity. 
B)  increase retained earnings. 
C)  decrease total paid-in capital. 
D)  decrease net income.

Question 3

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

Accepted Answer

The answer of Davis Corporation had 25,000 shares of $10...

Question 4

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

Accepted Answer

A)  Ability to raise large amounts of capital. 
B)  Government regulation. 
C)  Ease of transferability of ownership. 
D)  Continuity of existence.

Question 5

Thomas Corp. has the following number of shares of stock outstanding: $\begin{array}{l}
\text { Cumulative Preferred stock, } 8 \%, \$ 100 \text { par, }&10,000 \text { shares } \
\text { Common stock, } \$ 10 \text { par } &10,000 \text { shares }
\end{array}$ 
Thomas will distribute $44,000 to the two classes of stockholders this year. Not counting the current year, the preferred stock dividends are two years in arrears. Indicate whether each of the following statements is true or false.
1. Thomas' common stockholders will receive $36,000 of cash dividends
2. The amount of dividends in arrears on preferred stock is zero after the $44,000 of dividends have been paid
3. If the preferred stock was not cumulative, the dividends not paid in previous years would not be paid in the current year
4. When preferred stock is cumulative, no dividends can be paid on common stock so long as there are preferred dividends in arrears
5. Preferred stockholders will receive $24,000 of cash dividends

Accepted Answer

The answer of Thomas Corp. has the following number of...

Question 6

Allen Corporation was organized on July 15, 2014. It was authorized to issue 150,000 shares of $25 par value common stock and 50,000 shares of 6% cumulative preferred stock. The preferred stock had a stated value of $50 per share. The following stock transactions relate to Allen Corporation.
Issued 55,000 shares of common stock for $33 per share.
Issued 2,750 shares of the class A preferred stock for $62 per share.
Issued 27,500 shares of common stock for $35 per share.
Required:
a) Indicate the effect of each of these transactions on Allen's financial statements. Include dollar amounts in the model, below. After recording the three transactions, calculate column totals.
b) After these transactions have been recorded, what is the total amount of stockholders' equity?
c) After these transactions have been recorded, how many shares of common stock are outstanding?

Accepted Answer

The answer of Allen Corporation was organized on July 15,...

Question 7

Madison Co. paid dividends of $3,000; $6,000; and $10,000 during 2012, 2013 and 2014 respectively. The company had 500 shares of preferred stock outstanding with a $10 per share cumulative dividend. The amount of dividends received by the common shareholders during 2014 would be:

Accepted Answer

A)  $6,000. 
B)  $5,000. 
C)  $3,000. 
D)  $4,000.

Question 8

Griffin, Inc. purchased 200 shares of its own $20 par value stock for $30 cash per share. Which of the following answers reflects how this purchase of treasury stock would affect Griffin's financial statements?

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D

Question 9

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $$\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$$ 
Patrick English and Brad Elison began their new partnership by each contributing $40,000 to their business. Indicate the effects of this transaction on the partnership's financial statements. $\begin{array}{|l|l|l|l|l|l|}
\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}
\text { Net } \
\text { Income }
\end{array} & \begin{array}{c}
\text { Cash } \
\text { Flow }
\end{array}\\hline&&&
\end{array}$

Accepted Answer

The answer of Indicate how each event affects the elements...

Question 10

Which type of stock, common or preferred, must all corporations have?

Accepted Answer

The answer of Which type of stock, common or preferred,...

Question 11

Describe how the following transactions affect the balance sheet, income statement, and statement of cash flows of Askins, Inc.:
a) On 2/1/12, Askins purchased for cash, in the open market, 1,000 shares of its own common stock at $40 per share.
b) On 7/1/12, 200 of the shares purchased on 2/1/12 were sold at $43 per share.

Accepted Answer

The answer of Describe how the following transactions affect the...

Question 12

Purchase of treasury stock for cash is what kind of transaction?

Accepted Answer

A)  asset source 
B)  asset use 
C)  asset exchange 
D)  claims exchange

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Explain the significance of a high price-earnings ratio.

Accepted Answer

The answer of Explain the significance of a high price-earnings...

Question 15

Anstendig Corp. has 250,000 shares of common stock authorized. It has issued 75,000 shares and has reacquired 12,000 of these shares as treasury stock. Anstendig subsequently declared a cash dividend of $3 per share. What is the total amount of dividends that were declared?

Accepted Answer

The answer of Anstendig Corp. has 250,000 shares of common...

Question 16

What is meant by "double taxation?" Which form of business organization is subject to double taxation?

Accepted Answer

The answer of What is meant by "double taxation?" Which...

Question 17

For 2014, the Hilary Corporation had beginning and ending Retained Earnings balances of $198,054 and $231,000, respectively. Also during 2014, 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 2014?

Accepted Answer

The answer of For 2014, the Hilary Corporation had beginning...

Question 18

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $$\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$$ 
Tharp Company appropriated $10,000,000 of retained earnings related to its plans for building a new office building. $\begin{array}{|l|l|l|l|l|l|}
\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}
\text { Net } \
\text { Income }
\end{array} & \begin{array}{c}
\text { Cash } \
\text { Flow }
\end{array}\\hline&&&
\end{array}$

Accepted Answer

The answer of Indicate how each event affects the elements...

Question 19

Fredericksburg Corporation had issued and outstanding 150,000 shares of $8 par value common stock at January 1, 2014 with a retained earnings balance of $750,000. Fredericksburg 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) Describe how the stock dividend will affect Fredericksburg's stockholders' equity accounts.
c) How many shares of common stock are outstanding after the stock dividend?

Accepted Answer

The answer of Fredericksburg Corporation had issued and outstanding 150,000...

Question 20

Stock of a closely-held corporation does not trade on a stock exchange.

Accepted Answer

A) True 
 B)False

Exam 8: Proprietorships, Partnerships, and Corporations

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

The issuance of a stock dividend will

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

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

Madison Co. paid dividends of $3,000; $6,000; and $10,000 during 2012, 2013 and 2014 respectively. The company had 500 shares of preferred stock outstanding with a $10 per share cumulative dividend. The amount of dividends received by the common shareholders during 2014 would be:

Griffin, Inc. purchased 200 shares of its own $20 par value stock for $30 cash per share. Which of the following answers reflects how this purchase of treasury stock would affect Griffin's financial statements?

Which type of stock, common or preferred, must all corporations have?

Purchase of treasury stock for cash is what kind of transaction?

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

Explain the significance of a high price-earnings ratio.

Anstendig Corp. has 250,000 shares of common stock authorized. It has issued 75,000 shares and has reacquired 12,000 of these shares as treasury stock. Anstendig subsequently declared a cash dividend of $3 per share. What is the total amount of dividends that were declared?

What is meant by "double taxation?" Which form of business organization is subject to double taxation?

Stock of a closely-held corporation does not trade on a stock exchange.