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Exam 20: Corporations: Formation and Capital Stock Transactions

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Question 1

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A corporation has 10,000 shares of 5 percent, $50 par-value cumulative preferred stock and 50,000 shares of $4 par-value common stock outstanding. Last year, no dividends were paid. This year, the board of directors declared a dividend of $75,000. The common stockholders will receive a dividend this year of:

A) $1.00 a share.
B) $0.50 a share.
C) $2.00 a share.
D) $4.00 a share.

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

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Question 2

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Contreras Corporation issued 16,000 shares of its no-par-value common stock (stated value, $4)for cash at $28 a share. Record the issuance of the stock on page 1 of a general journal. Omit the description.

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Question 3

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Callable preferred stock is the stock of another firm that a corporation has purchased as an investment.

Common stock can be converted to preferred stock at the shareholder's discretion.

Organization costs should be:

The Haines Corporation has outstanding 65,000 shares of 5%, $100 par-value, cumulative, nonparticipating preferred stock and 160,000 shares of $2 par-value common stock, sold at an average price of $20 per share. There were no dividends in arrears. The board of directors voted to distribute $240,000 as dividends in 2019, $410,000 in 2020, and $520,000 in 2021. Compute the following: 1. Total dividend paid to preferred stockholders in 2019. 2. Total dividend paid to common stockholders in 2019. 3. Total dividend paid to preferred stockholders in 2020. 4. Total dividend paid to common stockholders in 2020. 5. Total dividend paid to preferred stockholders in 2021. 6. Total dividend paid to common stockholders in 2021.

A person who signs a(n)-----------contract agrees to purchase stock and pay for the shares at a later date.

Subscriptions Receivable is the control account for the subscribers' ledger.

When a corporation issues stock, the amount received in excess of the par value of preferred stock is recorded in an account called Paid-in Capital in Excess of Par Value-Preferred Stock.

A corporation has 2,000 shares of 8 percent, $50 par-value preferred stock and 20,000 shares of $5 par-value common stock outstanding. If the board of the directors declares dividends totaling$80,000, the preferred stockholders will receive a dividend of:

Subchapter S corporations:

The Northwest Corporation has outstanding 20,000 shares of 12% percent, $50 par-value, cumulative, nonparticipating preferred stock and 100,000 authorized common shares of which 80,000 shares of $10 par-value common stock are outstanding. There were no dividends in arrears. The board of directors voted to distribute $60,000 as dividends in 2019, $140,000 in 2020, and $200,000 in 2021. Compute the following: 1. Amount paid on each share of preferred stock in 2019. 2. Amount paid on each share of common stock in 2019. 3. Amount paid on each share of preferred stock in 2020. 4. Amount paid on each share of common stock in 2020. 5. Amount paid on each share of preferred stock in 2021. 6. Amount paid on each share of common stock in 2021.

The outstanding stock of The Rip Torn Company is composed of 10,000 shares of $50 par, 10%, cumulative preferred stock and 50,000 shares of $20 par common stock. Dividends have not been paid for the current year or the previous two years. If $240,000 is to be distributed as dividends for the current year, what total amount will be distributed to the preferred stockholders?

Rukshad Patel, the owner of a sole proprietorship, is planning to incorporate her business. Her capital account has a balance of $280,000 after revaluation of the assets. Her cash account totals $75,000. She will receive 10%, $10 par-value preferred stock with a total par value equal to the cash transferred. The balance of her capital is to be exchanged for shares of $2 par-value common stock with a total par value equal to the remaining capital. How many shares of preferred stock should be issued to Patel? How many shares of common stock should be issued to Patel?

If a corporation sells 700 shares of 8 percent, $80 par-value preferred stock for $96 a share, the entry to record the transaction will include a credit of------------- to the Preferred Stock account.

The balance of the Preferred Stock account represents the value of the----------- preferred shares issued.

Andrews Corporation has 25,000 common shares authorized and 20,000 shares were issued and outstanding at year end. During the year, the corporation's net income after taxes was $42,000. The policy of the corporation has been to declare dividends equal to 20% of its net income. What is the per share amount to be distributed to the common stockholders?

The holder of a share of 12 percent, $100 par-value preferred stock would receive a dividend of-----------per share before any dividend was paid to common stockholders.

The Southeast Corporation has outstanding 40,000 shares of 12% percent, $50 par-value, noncumulative, nonparticipating preferred stock and 160,000 shares of $10 par-value common stock. There were no dividends in arrears. The board of directors voted to distribute $240,000 as dividends in 2019, $280,000 in 2020, and $520,000 in 2021. Compute the following: 1. Amount paid on each share of preferred stock in 2019. 2. Amount paid on each share of common stock in 2019. 3. Amount paid on each share of preferred stock in 2020. 4. Amount paid on each share of common stock in 2020. 5. Amount paid on each share of preferred stock in 2021. 6. Amount paid on each share of common stock in 2021.

The number of shares of common stock that can be issued for each share of convertible preferred stock is referred to as the---------- .