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Exam 13: Accounting for Corporations

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Question 51

True/False

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A corporation is a legal entity separate from its owners.

A) True
B) False

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Question 52

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A common statutory restriction is reported on the income statement whereas; a common contractual restriction is reported in the stockholders' equity section of the balance sheet.

A) True
B) False

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Question 53

Multiple Choice

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Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company declared a $27,000 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is:

A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share. The issue price was $10 per share. The entry to record this transaction would be:

Treasury stock is classified as:

A corporation's distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a:

The Discount on Common Stock account reflects:

Organization expenses of a corporation often include legal fees and promoter fees.

A corporation received its charter and began business this year. The company is authorized to issue 500,000 shares of $100 par, 6%, noncumulative, nonparticipating preferred stock, and 1,000,000 shares of no-par common stock. The following selected transactions occurred during this year: Mar. 5 Issued 250 shares of preferred stock for $102 cash per share. July 15 Exchanged 750 shares of common stock for $12,000 in legal services incurred in the organization of the company. Prepare journal entries to record these transactions.

Ultimate Sportswear has $100,000 of 8% noncumulative, nonparticipating, preferred stock outstanding. Ultimate Sportswear also has $500,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, the company paid cash dividends of $30,000. This dividend should be distributed as follows:

Treasury stock is stock that has been authorized, issued, and is outstanding.

A company paid $0.85 in cash dividends per share. Its earnings per share is $3.50, and its market price per share is $35.50. Its dividend yield equals:

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

A stock dividend is recorded with a transfer from:

The statement of changes in stockholders' equity:

Robin Company had net income of $67,000. The company had 9,000 weighted average common shares outstanding. The basic earnings per share equal $7.44 per share.

What is treasury stock? What reasons might a company hold treasury stock?

A corporation declared and issued a 15% stock dividend on October 1. The following information was available immediately prior to the dividend: $\begin{array} { l } \text {Retained earnings }&\$750,000 \\ \text { Shares issued and outstanding}&60,000 \\ \text {Market value per share }&\$15 \\ \text { Par value per share}& \$5\\\end{array}$ The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

If a corporation is authorized to issue 1,000 shares of $5 common stock, it is said to have $5,000 of stock outstanding.

A reverse stock split increases the market value per share and the par value per share of stock.