ACCT CH.13

Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $15,000 dividend, the payments to preferred shareholders will total ______.

$2500

Rank the following groups in order of authority--with the highest authority at the top.

1. Stock Holders 2. Board of Directors 3. President, Vice President, and other officers 4. Employees

Mario Hernandez owns 25 shares of $100 par, 5% cumulative preferred stock. During the current year, no dividends are declared or paid. The unpaid amount of $___ is considered dividends in ___

125 arrears

Blink, Inc. has 1,000 shares of $10 par, 5% preferred stock, and 20,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $20,000 dividend, the payment to common shareholders will total $___

19500

___ stock is the number of shares that a corporation's charter allows it to sell. The number of these shares usually exceeds the number of shares issued (and outstanding), often by a large amount.

Authorized

Payton, Inc.'s charter authorized 100,000 shares of stock with a par value of $1 per share. Payton issues 100 shares at a market value of $5 per share. The journal entry to record this transaction will include a credit to Blank______ in the amount of Blank______.

Common Stock, $1 par; $100

Identify the advantages of the corporate form of business.

Continuous life Ease of capital accumulation Limited liability of stockholders

Identify the disadvantages of the corporate form of business.

Corporate taxation Government regulation

Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, $___

Credit 500

Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries?

Credit to Common Stock, $1 par for $200. Debit to Cash for $200.

Niren, Inc.'s charter authorizes 1,000,000 shares of stock at a par value of $1 per share. Niren sells 100 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, $1 par for $ ___

Credit, 100

(Cumulative/non-cumulative) preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Cumulative

______ preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Cumulative

Authorizing a cash dividend payment to investors requires three crucial dates. Identify which of the following is not a correct term to describe these dates.

Date of authorization

When a corporation declares and pays a cash dividend, there are three notable important dates. Which date does not require a formal journal entry to the financial statements?

Date of record

Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share. Vanya sells 50 shares of stock at its initial offering for $10 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.)

Debit to Cash for $500. Credit to Common Stock for $50. Credit to Paid-In Capital, in Excess of Stated Value for $450.

While stockholders elect the board of directors of a corporation, the board of ____ hires the president, vice president and other officers, who manage the corporation.

Directors

An advantage of purchasing preferred stock is that preferred shareholders are guaranteed to receive dividend payments each year.

False

Organization expenses, or the costs to organize a corporation, include which of the following?

Legal Fees Charter Fees

Identify which of the following is not generally a right of common stockholders.

Manage operations

______ value stock is stock not assigned a value per share by the corporate charter. Its advantage is that it can be issued at any price without the possibility of a minimum legal capital.

No-Par

John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts?

Paid-in Capital in Excess of Par Value Common Stock

Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200 shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to record this transaction in the books of Damian, Inc., will include a credit to Blank______ in the amount of Blank______.

Paid-in Capital, in Excess of Par; $8,000

Philip's Inc. reports stockholders' equity on its financial statements. The two items reported in the stockholders' equity section of Philip's balance sheet are ___ Capital and Retained Earnings.

Paid-in or Contributed

The ______ value of stock is an amount assigned per share by the corporation in its charter. In many states, this amount establishes the minimum legal capital, which refers to the least amount that the buyers of stock must contribute or be subject to paying at future dates.

Par

The market value per share is the price at which stock is bought and sold. Which of the following factors does not influence market value?

Par Value

A charter application usually must be signed by the prospective stockholders called incorporators or ___ . Then, it is filed with the appropriate state official.

Promoters

On March 15, the board of directors of Richmond, Inc. declare a cash dividend of $1 per share. On March 15, there are 1,000 shares of stock issued and outstanding. The journal entry required on the date of declaration will include a debit to the Blank______ account.

Retained Earnings

The account that consists of a company's cumulative net income less any losses and dividends declared since its inception is called ______.

Retained Earnings

Stockholders' equity, reported on the balance sheet, consists of which of the following accounts? (Check all that apply.)

Retained Earnings Paid-in Capital

Vernon, Inc.'s charter did not assign a par-value to its authorized stock. However, Vernon's directors assigned a(n) ______ value per share. This value becomes the minimum legal capital per share in this case.

Stated

______ value stock is no-par stock to which the directors assigned a certain value per share. This value becomes the minimum legal capital per share in this case.

Stated

Capital ___ is a general term that refers to any shares issued to obtain capital (owner financing).

Stock

Which of the following is not a reason that a corporation would issue preferred stock?

To obtain a tax advantage over corporations with no preferred stock

Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.

True

Stockholders have the right to ___ at stockholders' meetings.

Vote

A voluntary transfer of amounts from Retained Earnings to inform users of special activities that require funds are called:

appropriated retained earnings

No-par value stock is stock not assigned a value per share by the corporate charter. Its advantage is that it can be issued Blank______ without the possibility of a minimum legal capital.

at any price

Dean, Inc.'s charter indicates a par value of $1 per share. Dean issues 100 shares at a market value of $8 per share. The journal entry to record this transaction will include a debit to the ___ account in the amount of $___

cash 800

Investors who buy a corporation's stock sometimes receive a stock ____ as proof of share ownership.

certificate

When all authorized shares of stock have the same rights and characteristics, the stock is called ______ stock.

common

Rush, Inc.'s charter authorized 500,000 shares of stock with a par value of $1 per share. Rush issues 10 shares at a market value of $10 per share. The journal entry to record this transaction will include a (debit/credit) to the Common Stock, $1 par account in the amount of $___

credit 10

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) to the preferred stock account in the amount of $___

credit 100

Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, for $

credit 500

On May 25, Tyler, Inc. issues 100 shares of $10 par value preferred stock for $5,000 cash. The entry to record this transaction would include a (debit/credit) Blank______ to the preferred stock account in the amount of Blank______.

credit; $1,000

The board of directors authorizes a cash ___ or distribution of cash to its investors.

dividend

When stock is cumulative preferred stock and the board of directors does not declare a dividend, the unpaid dividend amount is called:

dividend in arrears.

Preferred stock usually carries a preference for dividends, meaning that:

dividends are allocated to preferred shareholders before they are issued to common shareholders

Retained Earnings

is an account that consists of a company's cumulative net income less any losses and dividends declared since its inception.

The ______ value per share is the price at which a stock is bought and sold.

market

Jordan Inc.'s charter states that there are 50,000 shares of stock authorized with a par value of $5 per share. This typically means that investors must pay a (minimum/maximum) of $5 per share to invest in the corporation.

minimum

The costs to start a corporation are called ___ expenses.

organization

When the board of directors authorizes a cash dividend to investors, there are three important dates involved—the date of declaration, date of record, and date of

payment

______ has/have special rights that give it priority over other types of stock in one or more areas.

preferred stock

A ______ on stock occurs when a corporation issues its stock for more than par (or stated) value.

premium

Martin, Inc.'s charter authorizes 50,000 shares of stock with a par value of $1 per share. 1,000 shares of stock are issued at a market value of $5 per share. This means that the shares of stock are issued at a (premium/discount)

premium

Corrections of material errors in past financial statements are called ___ period adjustments.

prior

Corrections of material errors in prior period financial statements, such as arithmetic errors, unacceptable accounting, and missed facts are reported in the statement of stockholders' equity as:

prior period adjustments

Statutory and contractual restrictions are called ___ retained earnings

restricted

A statement of stockholders' equity lists balances of:

retained earnings net income common stock shares cash dividends

The ______ lists the beginning and ending balances of key equity accounts and describes the changes that occur during the period.

statement of stockholders' equity

two of the biggest disadvantages of the corporate form of business are government regulation and corporate ____

taxation, taxes, tax, or double taxation

A corporation is created by obtaining a charter from ___

the state government

A corporation has agreed to pay a $0.10 cash dividend on shares of common stock. On the date of record, no formal journal entry is required.

true

Preferred stock can be issued to raise money without giving up control.

true