Question 1

The Carson-Newman partnership was formed on January 1, 2011, when Rebecca Carson and Steve Newman contributed cash of $80,000 and $120,000, respectively. During 2013, the partnership earned $320,000 in cash revenues and paid $216,000 in cash expenses. Carson withdrew $24,000 cash and Newman withdrew $16,000 cash from the business. Net income was allocated to the partners' capital accounts in proportion to their initial investment in the business.
Required:
Prepare an income statement, capital statement, balance sheet, and statement of cash flows for the partnership for 2013.

Accepted Answer

The answer of The Carson-Newman partnership was formed on January...

Question 2

Frazier Corporation shows a total of $660,000 in its Common Stock account and $1,600,000 in its Paid-in Capital Excess account. The par value of Frazier's common stock is $4. How many shares of Frazier stock have been issued?

Accepted Answer

A)  165,000.
B)  400,000.
C)  235,000.
D)  It cannot be determined A

Question 3

On September 1, 2013, Orson Corporation has unrestricted Retained Earnings of $7,000,000, Appropriated Retained Earnings of $4,000,000, Cash of $8,500,000, and Accounts Payable of $500,000. What is the maximum amount that can be used for cash dividends?

Accepted Answer

A)  $8,500,000
B)  $7,000,000
C)  $8,000,000
D)  $3,000,000 B

Question 4

Church Company declared and paid a cash dividend. Which of the following choices accurately reflects how this event would affect the company's financial statements?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option D

Question 5

Proprietorships are not separate legal entities; their earnings are taxable to the owners and not to the business itself.

Accepted Answer

A) True 
 B)False

Question 6

Indicate whether each of the following statements about stockholders' equity is true or false.
_____ a) Preferred stockholders generally have a preference to assets when the company is liquidated.
_____ b) Preferred stockholders generally have a preference to dividends.
_____ c) Preferred stock carries voting rights that gives the preferred stockholders greater power in the corporation's decision making process than common stockholders have.
_____ d) Preferred stockholders generally receive a set or fixed amount of dividends.
_____ e) If a corporation has issued non-cumulative preferred stock, common stockholders may receive lower dividends than if the corporation has issued cumulative preferred stock.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 7

White Company reissued 100 shares of treasury stock. The treasury stock had been purchased by White at $28 per share. The shares were reissued at a price of $30 per share.

Accepted Answer

The answer of White Company reissued 100 shares of treasury...

Question 8

Wu Corporation issued 10,000 shares of no-par common stock for $35 per share. For this transaction, Common Stock should be credited (increased) for $350,000.

Accepted Answer

A) True 
 B)False

Question 9

Wagner Corporation was authorized to issue 100,000 shares of $12 par common stock. During 2013 Wagner issued 20,000 shares at a market price of $18 per share. On December 1, 2013 Wagner declared a cash dividend of $2.50 per share payable on December 30 to stockholders of record as of December 15.
Required:
a) Prepare the journal entry for the issuance of the 20,000 shares of stock. Assume an issue date of June 30, 2013.
b) Prepare the journal entries necessary on the dividend:
(1) declaration date.
(2) date of record.
(3) payment date.

Accepted Answer

The answer of Wagner Corporation was authorized to issue 100,000...

Question 10

Which of the following is not a reason why a corporation may choose not to pay dividends?

Accepted Answer

A)  The board and management prefer to reinvest all net income for future growth.
B)  The corporation does not have adequate cash.
C)  The corporation does not have adequate retained earnings.
D)  All of these are valid reasons not to pay dividends.

Question 11

Which of the following statements about types of business entities is true?

Accepted Answer

A)  One advantage of a corporation is ability to raise capital.
B)  Ownership in a partnership is represented by having shares of capital stock.
C)  For accounting purposes a sole-proprietorship is not a separate entity from its owner.
D)  Sole-proprietorships are subject to double-taxation.

Question 12

Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships and corporations.

Accepted Answer

The answer of Explain how the equity section of a...

Question 13

Monroe Co. declared and distributed a stock dividend.

Accepted Answer

The answer of Monroe Co. declared and distributed a stock...

Question 14

Treasury Stock is an equity account with a normal credit balance.

Accepted Answer

A) True 
 B)False

Question 15

Explain the significance of (a) a high, and (b) a low, price-earnings ratio.

Accepted Answer

The answer of Explain the significance of (a) a high,...

Question 16

Prepare the journal entries needed for the following transactions occurring during 2013 for Valentino, Inc.:
a) On 2/1/13, Valentino purchased for cash, in the open market, 2,000 shares of its own common stock at $40 per share.
b) On 7/1/13, 800 of the shares purchased on 2/1/13 were sold at $38 per share.

Accepted Answer

The answer of Prepare the journal entries needed for the...

Question 17

A reason often given for a corporate stock split is:

Accepted Answer

A)  to protect the interest of creditors.
B)  to reduce the market price of the stock.
C)  to increase the par value of the stock.
D)  to absorb the treasury stock.

Question 18

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

Accepted Answer

A)  Ability to raise capital.
B)  Lack of government regulation.
C)  Ease of transferability of ownership.
D)  Continuity of existence.

Question 19

The stock market crash in 1929 led to the beginning of extensive regulation of corporations.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following terms designates the maximum number of shares of stock that a corporation may issue?

Accepted Answer

A)  Number of shares authorized
B)  Number of shares issued
C)  Par value
D)  Number of shares outstanding

Exam 11: Proprietorships, Partnerships, and Corporations

Frazier Corporation shows a total of $660,000 in its Common Stock account and $1,600,000 in its Paid-in Capital Excess account. The par value of Frazier's common stock is $4. How many shares of Frazier stock have been issued?

On September 1, 2013, Orson Corporation has unrestricted Retained Earnings of $7,000,000, Appropriated Retained Earnings of $4,000,000, Cash of $8,500,000, and Accounts Payable of $500,000. What is the maximum amount that can be used for cash dividends?

Church Company declared and paid a cash dividend. Which of the following choices accurately reflects how this event would affect the company's financial statements?

Proprietorships are not separate legal entities; their earnings are taxable to the owners and not to the business itself.

White Company reissued 100 shares of treasury stock. The treasury stock had been purchased by White at $28 per share. The shares were reissued at a price of $30 per share.

Wu Corporation issued 10,000 shares of no-par common stock for $35 per share. For this transaction, Common Stock should be credited (increased) for $350,000.

Which of the following is not a reason why a corporation may choose not to pay dividends?

Which of the following statements about types of business entities is true?

Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships and corporations.

Monroe Co. declared and distributed a stock dividend.

Treasury Stock is an equity account with a normal credit balance.

Explain the significance of (a) a high, and (b) a low, price-earnings ratio.

A reason often given for a corporate stock split is:

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

The stock market crash in 1929 led to the beginning of extensive regulation of corporations.

Which of the following terms designates the maximum number of shares of stock that a corporation may issue?