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Exam 11: Corporations: Organization, Stock Transactions, and Stockholders Equity

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Question 101

Multiple Choice

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The per share amount normally assigned by the board of directors to a small stock dividend is

A) the market value of the stock on the date of declaration.
B) the average price paid by stockholders on outstanding shares.
C) the par or stated value of the stock.
D) zero.

E) B) and C)
F) A) and D)

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Question 102

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A corporation can be organized for the purpose of making a profit or it may be not-for-profit.

A) True
B) False

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Question 103

Multiple Choice

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Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2018. If the board of directors declares a $70,000 dividend, the

Which of the following is not true of a corporation?

Aim, Inc., has 10,000 shares of 4%, $100 par value, noncumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2018. There were no dividends declared in 2017. The board of directors declares and pays a $120,000 dividend in 2018. What is the amount of dividends received by the common stockholders in 2018?

Wave Company originally issued 30,000 shares of $5 par common stock for $210,000 on January 3, 2018. Wave purchased 1,500 shares of treasury stock for $12,000 on November 2, 2018. On December 6, 2018, 600 shares of the treasury stock are sold for $7,200. Instructions Prepare journal entries to record these stock transactions.

A corporation has a separate __________________________ apart from its owners.

On November 1, 2018, Tech Corporation's stockholders' equity section is as follows: On November 1, Tech declares and distributes a 15% stock dividend when the market value of the stock is $16 per share. Instructions Indicate the balances in the stockholders' equity accounts after the stock dividend has been distributed.

If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is

The stockholders' equity section of Morton Corporation at December 31 is as follows. Instructions From a review of the stockholders' equity section, answer the following questions. (a) How many shares of common stock are outstanding? (b) Assuming there is a stated value, what is the stated value of the common stock? (c) What is the par value of the preferred stock? (d) If the annual dividend on preferred stock is $15,000, what is the dividend rate on preferred stock? (e) If dividends of $30,000 were in arrears on preferred stock, what would be the balance in Retained Earnings?

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

Bacon Corporation began business by issuing 180,000 shares of $5 par value common stock for $25 per share. During its first year, the corporation sustained a net loss of $30,000. The year-end balance sheet would show

A detailed stockholders' equity section in the balance sheet will list the names of individuals who are eligible to receive dividends on the date of record.

Sloman Corporation has 100,000 shares of $50 par value preferred stock authorized. During the year, it had the following transactions related to its preferred stock. (a) Issued 20,000 shares at $55 per share. (b) Issued 10,000 shares for equipment having an $800,000 asking price. The stock had a market value of $75 per share Instructions Journalize the transactions.

Dividends may be declared and paid in cash or stock.

The numerator of the return on common stockholders' equity is

If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from that corporation.

Which of the following statements about a cash dividend is incorrect?

Common Stock Dividends Distributable is classified as a(n)

On January 1, 2018, Ralph Corporation had $2,000,000 of $10 par value common stock outstanding that was issued at par and retained earnings of $1,000,000. The company issued 200,000 shares of common stock at $12 per share on July 1. On December 15, the board of directors declared a 15% stock dividend to stockholders of record on December 31, 2018, payable on January 15, 2019. The market value of Ralph Corporation stock was $14 per share on December 15 and $16 per share on December 31. Net income for 2018 was $500,000. Instructions (1) Journalize the issuance of stock on July 1 and the declaration of the stock dividend on December 15. (2) Prepare the stockholders' equity section of the balance sheet for Ralph Corporation at December 31, 2018.