ACCT for Corporations

True or False: 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

_____ stock typically includes preference for receiving dividends and for the distribution of corporate assets during liquidation

Preferred

A corporation with a (debit/credit) ______ balance for retained earnings is said to have a retained earnings deficit. This can arise when a company incurs cumulative losses or pays more dividends than total earnings.

debit

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

market

Martin's 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 to $5 per share. This means that the shares of stock are issued at a (premium/discount)

premium

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

$2,500; 10,000 shares x $5 x .05 = $2,500

Limited Liability of Stockholders

ADVANTAGE: Stockholders are not liable for corporate acts or corporate debts. If corporation is not able to pay it's debt, Creditors cannot go after personal assets

Transferable Ownership Rights

ADVANTAGE: Stockholders can sell their stock, which evidences their ownership interest.

____ stock is a general term that refers to any shares issued to obtain owner financing

Capital

Government Regulation

DISADVANTAGE: A corporation much meet requirements of a state's information laws, which subjects the corporation to state regulation and control. Partnerships and Proprietorships avoid many of these regulations

Long, Inc. purchased 50 shares of its own $10 par value common stock for $50 per share. The journal entry to record this transaction would include a debit to the _______ Stock account in the amount of _____

Treasury $2,500; 50 shares x $50 = $2,500

On June 1, the board of directors of Big, Inc. declare a 20% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to record this transaction include a (debit/credit) ______ to Retained Earnings in the amount of _____

Debit; $10,000

Corporations can be separated into two types. A ________ held corporations does NOT offer its stock to the public sale and usually has few stockholders. A ______ held corporation offers its stock for public sale and can have thousands of stockholders

Privately Publicly

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

Retained Earnings

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 a minimum legal capital per share in this case.

Stated

Stated Value

The value per share is assigned by the board of directors

Which of the following characteristics applies to both a sole proprietor and a general partnership but not a corporation?

Unlimited Life

Peas, Inc. has 1,000 shares of $5 par value common stock outstanding. The annual cash dividend per share was $6.00; market value per share was $30; and net income during the period was $65,000. Dividend yield equals _____%

20

The board of directors of Anchor, Inc. authorizes at $0.50 cash dividends to its 100,000 shares of common stock issued and outstanding. On the date of payment, a journal entry will include which of the following accounts?

Debit to Common Dividend Payable Credit to Cash

Zion, In. declares a 10% stock dividend when there are 10,000 shares of $1 per value stock issued and outstanding and the market value is $5 per share. on the date of payment, Zion will issue the stock and record the translation with which of the following entries?

Debit to Common Stock Dividend Distributable for $1,000 Credit to Common Stock for $1,000

On June 1, the board of directors of Dylan Inc. declare a cash dividend of $1 per share. On June 1, there are 1,000 shares of stock issued and outstanding. The journal entry require on the date of declaration will include a

credit to the Common Dividend Payable account

Visor, Inc. had net income during the period of $10,000. Preferred dividends were $2,000 and the weighted-average common shares outstanding were 500. Basic earnings per share equal.

$16

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

stock

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

Retained Earnings

On January 1, the board of directors of Shante, Inc. declared a 10% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to record this transaction would include a debit to _____ in the amount of _____

Retained Earnings; $5,000

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

Nonparticipating Preferred Stock

Annual dividends are limited

______ stock is the number of shares that a coloration's charter allows it to sell

Authorized

Corporate Taxation

Corporate income is subject to federal and state income taxes. Also, double taxation might occur - they pay corporate pays taxes on their income and then stockholders pay dividends on the corporation.

What is the accounting treatment for corporate organization costs?

Corporate organization costs are debited to an expense account when they are incurred

Outstanding Stock

Issued stock that is currently held by stockholders

Authorized & Issued

Issued to stockholders to evidence their interest in the corporation

Callable Preferred Stock

Issuing corporation has the right, or option, to retire its stock

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

Manager operations

_____ preferred stock confers no right to prior period unpaid dividends

Noncumulative

_______ stock refers to issued stock that is currently held by stockholders

Outstanding

A _____ dividend, declared a corporation's directors, is a distribution of addition shares of the corporation's own stock

Stock

The board of directors of Visor, Inc. authorize a _____, a distribution of addition shares of the corporation's own stock, to existing shareholders.

Stock Dividend

Key's Inc. purchases 100 shares of its own common stock for $10 per share. The stock is now classified as ____ stock, a contra equity account, reported on the statement of stockholder's equity.

Treasury

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

at any price

A ______ dividend, declares by a corporation's directors, is a distribution of addition shares of the corporation's own stock

stock

Stockholders have the right to _____ at stockholders' meetings

vote

Identify the disadvantage of the corporate form of business.

Government Regulation Corporate Taxation

Crystal, Inc. has 500 shares of outstanding $10 par common stock, with a current market value of $20 per share. Earnings per share is $2.99. The price earnings ratio is

10

Mario Hernandez owns 25 shares at $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 a 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; $10 x .05 x 1,000 shares = 500. Total dividend is $20,000. $20,000 - $500 = 19,500 common shareholders

Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie sells 100 shares of stock at its initial offering for $5 per share. The journal entry would include a

Credit to Common Stock for $500

Dean Inc.'s charter indicates a par value of $1 per share. Dean issues a 100 shares at a market value of $8 per share. The journal entry to record this transaction will be include

Debit to Cash account for $800

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

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

Preferred sock usually carries a preference of dividends, meaning that:

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

A stock dividend that is greater than 25% of the previously outstanding shares of stock is considered to be a ____ stock dividend

large

The formula for the price-earnings ratio is _______ value per share/earnings per share

market

A company has 10,000 shares of $100 par, 6% cumulative preferred stock outstanding. If the company declares a total of $200,000 of cash dividends for the year for both its common and preferred stock and the preferred stock is two years in arrears, how much will be allocated to the (1) preferred stockholders and (2) the common stockholders?

(1) $180,000 and $20,000 Compute the annual dividend requirement for the preferred stock and then multiply it by the number of years owed. Deduct this amount from $200,000 to get the amount allocated to the common stockholders

A small stock dividend is a distribution of __% of less of previously outstanding shares

25

_____ reflects the amount of equity applicable to common shares on a per share basis. It is computed by taking stockholders' equity applicable to common hares and dividing it by the number of share outstanding.

Book Value Per Common Share

On January 1, Lang Inc. has 100,000 shares of stock issued and outstanding. The board of directors of Lang wants to authorize a large stock dividend. This means that they must authorize a stock dividend of at least ____ shares of stock

25,001 - A large stock dividend is a distribution of 25% of previously issued outstanding shares

Stock splits are different from stock dividends but both of them result in an increase in the number of outstanding shares. A corporation has 10,000 shares of outstanding stock. Which of the following pairs of numbers will yield the same number of new shares outstanding?

A 5 for 4 stock split is the same as a 25% stock dividend. Calculate the number of shares outstanding after the stock split by multiplying 10,000 x 5/4. Then, calculate the number of shares outstanding after the stock dividend by multiplying the stock dividend percentage by 10,000 shares and adding the result to 10,000

Separate Legal Entity

ADVANTAGE: A corporation conducts its affairs with the same rights, duties, and responsibilities of a person. It takes actions through its agents (its officers and managers)

Continuous Life

ADVANTAGE: A corporation's life continues indefinitely - not tied to the physical lives of its owners

Ease of Capital Accumulation

ADVANTAGE: Buying stock is attractive to investors.

Lack of Mutual Agency for Stockholders

ADVANTAGE: Stockholders, who are not corporate officers or managers, do not have the power to bind the corporation to contracts

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

Charter fees Legal fees

The board of directors of Chester Inc. authorizes a $0.10 cash dividend to its 10,000 shares of common stock issued and outstanding. On the date of payment, a journal entry will debit which of the following accounts?

Common Dividend Payable for $1,000

John Kim agrees to contribute equipment with a fair market value or $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?

Common Stock Paid-In Capital In Excess of Par Value

J. Flores owns a business and is trying to decide whether to incorporate. While researching corporations, she has determined the following facts. Which of these facts is INCORRECT?

Corporations dissolve when owners transfer rights

The entry to close a Income Summary account, when a company has net income, will include a _____ to the Retained Earnings account

Credit

Avery, Inc. held 100 share sof its own $10 par value common stock purchased for $15 per share. On December 1, Avery sold 10 shares for $15 per share. The journal entry to record the sale of treasury stock would include (debit/credit) _____ to Treasury Stock in the amount of $_____

Credit to Treasury Stock of $150

In January, Stripe, Inc. purchased 50 shares of its own $10 par value common stock for $20 per share. In March, Stripe sold 10 shares at $25 per share. The journal entry to record the sale of treasury stock using the cost method would include a (debit/credbit) _____ to Treasury Stock in the amount of _____

Credit; 200

(Cumulative/noncumulative) preferred stockholders have the right to be paid both the current and all prior periods' unpaid dividend's before any dividend is paid to common stockholders

Cumulative

Fortune, Inc. holds 50 shares of treasury stock purchased for $20 per share. In March, Fortune sold 10 shares for $50 per share. In December, Fortune sold another 5 shares at only $10 per share. The journal entry to rector the transaction for December will include a (debit/credit) _____ to the Paid-In Capital, Treasury Stock account in the amount of _____

Debit; $50 (20-10) x 5

Bryce, Inc. declared a 50% stock dividend on March 15, when there were 1,000 shares of $1 par value stock issued and outstanding, and the market value was $5. The entry to record the declaration will include a _____ to the Retained Earnings accounting, in amount of

Debit; $500 - 50% is a large stock dividend. Therefore, retained earnings is debited for the par value of stock issued. $1,000 x $1 x 50% = $500

Franz Inc. declared a 50% stock dividend when there were 10,000 shares of $1 par value stock issued and outstanding, and the market value was $5 per share. on the date of payment, the entry to record distribution of stock will include a (debit/credit) _____ to common stock dividend distributable account, in the amount of $0.

Debit; 5,000 - %50 is considered a large stock dividend which is recorded at par value. When the stock is issued, the common stock dividend distributable account is debited and common stock is credited at par value. $10,000 x $1 x 50% = $5,000

Participating Preferred Stock

Excess dividends are shared with common stockholders

True or False: To record a stock split, debit Retained Earnings and credit Common Stock

False

Capital Stock

General term that refers to any shares issued to obtain owner financing

Authorized Stock

Number of shares a corporation's charter allows it to sell. No formal journal entry needed, exceeds the number of Authorized Stock Issued

Philips Inc. reports stockholder's equity on its financial statement. The two items reported in the stockholder's equity section of Philip's balance sheet are _____ Capital and Retained Earnings

Paid-In

Stockholder's equity, reported on the balance sheet, consists of which of the following accounts?

Paid-In Capital Retained Earnings

Stockholder's Equity consists of

Paid-In Capital and Retained Earnings

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

Carin, Inc. declared a 50% stock dividend on January 15, when there were 10,000 shares of $1 par value stock issued and outstanding, and the market value was $20. The entry to record the declaration will include debit to the ______ account, in the amount of ______

Retained Earnings; $5,000

A stock _____ is the _____ distribution of additional shares to stockholders according to their percent ownership. When this occurs, the corporation "calls in" its outstanding shares and issues more than one new share in exchange for each old share

Split

When _____ value stock is issued, the value per share is assigned by the board of directors

Stated

Which of the following statements if FALSE regarding stock splits?

Stock splits increase retained earnings

Authorized, Issued & Oustanding

Stock that exceeds the issued shares

Convertible Preferred Stock

Stockholder can exchange preferred shares for common shares

A ______ is the distribution of cash to its owners. This is determined by the board of directors

cash dividend

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

common stock

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a

credit to Common Stock for $500

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

credit to Common Stock, $1 par account in the amount of $10

Logan, Inc. held 500 shares of treasury stock with a cost of $10 per share. In December, Logan sold 10 shares at $20 per share. The journal entry to record the sale of treasury stock using the cost method would include a (debit/credit) ______ to Treasury Stock in the amount of ______

credit; $100

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 _____ of $5 per share to invest in the corporation

minimum

Stockholder's equity consists of _____ and retained earnings

paid-in capital

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