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Exam 21: Corporate Earnings and Capital Transactions

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Question 61

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A corporation reported net income of $200,000 for its fiscal year and declared and paid cash dividends of $80,000. A stock dividend recorded at $40,000 was also distributed during the year. If the beginning balance of the Retained Earnings account was $60,000, calculate the ending balance in the Retained Earnings account.

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Question 62

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The adjustment for the amount of future taxes to be paid as a result of the MACRS depreciation deduction taken in this and prior years is recorded with:

A) a debit to Tax Expense and a credit to Deferred Income Tax Asset.
B) a debit to Deferred Income Tax Liability and a credit to Tax Expense.
C) a debit to Tax Expense and a credit to Deferred Income Tax Liability.
D) a debit to Deferred Income Tax Asset and a credit to Tax Expense.

E) C) and D)
F) All of the above

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Question 63

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For the current year, Genexo Corporation reported net income before income taxes of $235,000. Using the following corporate income tax rates, compute the corporation's federal income taxes payable. (Assume that the firm's taxable income is the same as its income for financial accounting purposes.)

Aspen Corporation reported net income of $120,000 for its fiscal year and declared and paid cash dividends of $60,000 during the year. In November, the 10,000 shares of $10 par, common stock split, 2 for 1. If the ending balance of the Retained Earnings prior to the split was $200,000, the beginning balance was:

The Dividends Payable account appears on the balance sheet as a(n)------- .

The cost of treasury stock is deducted from the ------------section of the balance sheet.

Information from the Income Statement columns of King Corporation's worksheet on December 31, 2019, is shown below. 1. What is the amount of net income before income tax? 2. What is the amount of income tax on the net income? Use the tax rates set forth below. 3. The corporation paid $5,000 through quarterly deposits. What adjustment is recorded for Income Tax Expense? 4. What is the amount of net income after income tax?

The total of the owners' claims to the assets of a corporation is represented by the:

The Matt Tress Sofa Company has 11,000 shares of $2 par common stock outstanding. On August 22, 2019, a 3% stock dividend was declared to be distributed on September 30, 2019. The market value of the stock on August 22 was $21; the market value on September 30 was $18. What is the amount to be credited to the Common Stock account on September 30?

The Denver Corporation is authorized to issue 3,000 shares of 8 percent, $50 par-value preferred stock and 10,000 shares of no-par-value common stock with a stated value of $20 per share. On December 31, 2019, 1,000 shares of preferred stock and 4,000 shares of common stock are issued and outstanding. The corporation's transactions affecting stockholders' equity during 2020 are given below. Record the transactions on page 8 of a general journal. Omit descriptions. Jan. 15 Repurchased 200 shares of outstanding preferred stock for $44,600 in cash. The stock is to be held as treasury stock. Mar. 1 Declared a 2-for-1 stock split of common stock. Each shareholder is to receive one new share for each share held. The stated value of the stock is reduced to $10 per share. Date of record is March 15. Date of issue is April 1. Apr. 1 Issued the new shares declared on March 1. July 15 Declared a cash dividend of 8 percent on preferred stock and $0.35 per share on common stock to be paid on August 1 to holders of record on July 31. Aug. 1 Paid the cash dividend declared on July 15. Oct. 5 Accepted title to a tract of land with a fair market value of $23,000 from the city of Fairview. The land is to be used as a building site for a new warehouse. Nov. 8 The board of directors passed a resolution to appropriate $40,000 for the construction of a new warehouse. Dec.15 Declared a stock dividend payable January 15, 2021, to common stockholders of record on December 28, 2020, at the rate of one new share of common stock for each ten shares held. The estimated market value of the common stock is $11 per share.

A corporation may use--------- to lower market share prices in an effort to attract new investors.

Which of the following would not change the amount of total retained earnings for the year?

Retained Earnings represents the net income earned throughout the years less amounts paid out as dividends.

A corporation reacquired 450 shares of its $100 par-value common stock for $112 a share. The entry to record this transaction includes a

Accumulated profits that are kept in the business, as opposed to being distributed as dividends to stockholders, are called---------- .

The Santa Fe Corporation is authorized to issue 6,000 shares of 4 percent, $100 par-value preferred stock and 20,000 shares of no-par-value common stock with a stated value of $40 per share. On December 31, 2019, 2,000 shares of preferred stock and 8,000 shares of common stock are issued and outstanding. The corporation's transactions affecting stockholders' equity during 2020 are given below. Record the transactions on page 15 of a general journal. Omit descriptions. Jan. 15 Repurchased 400 shares of outstanding preferred stock for $89,200 in cash. The stock is to be held as treasury stock. Mar. 1 Declared a 2-for-1 stock split of common stock. Each shareholder is to receive one new share for each share held. The stated value of the stock is reduced to $20 per share. Date of record is March 15. Date of issue is April 1. Apr. 1 Issued the new shares declared on March 1. July 15 Declared a cash dividend of 4 percent on preferred stock and $0.70 per share on common stock to be paid on August 1 to holders of record on July 31. Aug. 1 Paid the cash dividend declared on July 15. Oct. 5 Accepted title to a tract of land with a fair market value of $46,000 from the city of Evergreen Park. The land is to be used as a building site for a new factory. Nov. 8 The board of directors passed a resolution to appropriate $80,000 for the construction of a new warehouse. Dec.15 Declared a stock dividend payable January 15, 2021, to common stockholders of record on December 28, 2020, at the rate of one new share of common stock for each ten shares held. The estimated market value of the common stock is $22 per share.

A(n)---------dividend will decrease Retained Earnings but will not decrease total stockholders' equity.

When a corporation reacquires stock that it previously issued and intends to reissue at a later date, the------------ account is debited.