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Exam 13: Corporations: Organization, Stock Transactions, and Dividends

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Question 71

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Double taxation is a disadvantage of a corporation because the same party has to pay taxes twice on the income.

A) True
B) False

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Question 72

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If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are held as treasury stock, a cash dividend of $1 per share would amount to $15,000.

A) True
B) False

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Question 73

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A corporation has 10,000 shares of $100 par value stock outstanding. If the corporation issues a 5-for-1 stock split, the number of shares outstanding after the split will be 40,000.

On February 1 of the current year, Motor, Inc. issued 700 shares of $2 par common stock to an attorney in return for preparing and filing the Articles of Incorporation. The value of the services is $9,600. Journalize this transaction.

If Everly Company issues 1,000 shares of $5 par value common stock for $75,000, the account

On May 10, a company issued for cash 1,500 shares of no-par common stock (with a stated value of $2) at $14, and on May 15, it issued for cash 2,000 shares of $15 par preferred stock at $58. Journalize the entries for May 10 and 15, assuming that the common stock is to be credited with the stated value.

Alma Corp. issues 1,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:

The liability for a dividend is recorded on which of the following dates?

On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 4,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx. The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a

A corporation, which had 18,000 shares of common stock outstanding, declared a 3-for-1 stock split.

Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect a company's total assets, liabilities, and stockholders' equity.

The price at which a stock can be sold depends upon a number of factors. Which statement below is not one of those factors?

The ability of a corporation to obtain capital is

A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.

When a corporation issues stock at a premium, it reports the premium as an other income item on the income statement.

Sabas Company has 40,000 shares of $100 par, 1% preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Determine the dividends per share for preferred and common stock for each year.

When no-par stock is issued, the Common Stock account is credited for the selling price of the stock issued.

Retained earnings

The Dayton Corporation began the current year with a retained earnings balance of $32,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $7,000. Compute the year end retained earnings balance.

When the board of director's declares a cash or stock dividend, this action decreases retained earnings.