Financial Accounting Cornett Final

On the statement of cash flows, the cash flows from financing activities section would include:

receipts from the issuance of capital stock.

If the stated cash dividend on cumulative preferred stock has been unpaid for a period of one year or more, it is referred to as a dividend ____________________.

in arrears

A corporation issues 1,500 shares of common stock for $32,000. The stock has a par value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for:

$15,000

Dividends in arrears are required to be reported in:

the notes to the financial statements

Petry Corporation issues 20,000 shares of $.50 par common stock for $6 per share. The account for Additional Paid-In Capital in excess of par will increase by:

$110,000 20,000 X (6-.50)=110,000

Which of the following is not a characteristic of a corporation?

A corporation's resources are limited to their individual stockholders' resources.

What types of accounts are Treasury Stock and Additional Paid-in Capital from treasury stock transactions

Contra equity Stockholders' equity

Which one of the following would not be considered an advantage of the corporate form of organization?

Government regulation

Characteristics of a corporation include:

Shareholders who have limited liability

A distribution of profits to owners is called ____________________

dividend

Under the corporate form of business organization:

ownership rights are easily transferable

An arbitrary monetary amount that determines an entity's legal capital is the ____________________.

par value

Coral Cleaners reported the following information in the stockholders' equity section of its December 31, 2011, balance sheet.Refer to the information presented above for Coral Cleaners, Inc. Coral's total capital stock is: 7% Cumulative, non-participating preferred stock, $100 par, 500 shares authorized, issued, and outstanding, callable at par value $ 50,000Common stock, $12 par, 100,000 shares authorized 600,000Additional paid-in capital25,000Retained earnings825,000

$ 675,000 $50,000 (Preferred stock) + 600,000 (Common stock) + 25,000 (Additional paid-in capital) = $675,000.

Patch, Inc. plans to distribute $134,000 in dividends. It has outstanding 200,000 shares of 7% $10 par preferred stock (cumulative) and 60,000 shares of $2 par common stock. How much will be distributed per share on preferred and common stock?

$0.67 $ -0-

When is a liability for cash dividends created?

At the date of declaration.

When a corporation declares a cash dividend, which of the following is true

Equity decreases

Many stockholders choose to invest in preferred stock because:

dividends are distributed to preferred stockholders before common stockholders.

One of the main disadvantages of the corporate form is the:

double taxation on dividends

The excess of sales price of treasury stock over its cost should be credited to:

Additional Paid-In Capital

What is the primary reason for a stock split?

To decrease the market value

The number of shares sold to stockholders are ____________________ shares

issued

To compute the return on equity ratio, the numerator includes ____________________ and the denominator is the average stockholders' equity

net income

The ____________________ is a preferred stock having a feature that provides for the current year dividends only to be paid to preferred stockholders before they are paid to common stockholders.

noncumulative preferred stock

____________________ shares are the maximum number of shares a corporation can legally issue.

Authorized

On January 1, 2010, Framm Corporation issued 10,000 shares of its 10%, $20 par value cumulative preferred stock. No dividends were declared by Framm in 2010 or 2011. In 2012, Framm had a profitable year and was in a strong cash position, so itdeclared a dividend of $200,000. How much of this dividend was paid to Framm's common stockholders?

$140,000

On June 1, 2011, Donner Technologies declared a $50,000 cash dividend to be distributed to its common stockholders of record on June 15, 2011. The dividend will be paid on July 1, 2011. The required journal entry on June 1 includes a:

$50,000 debit to retained earnings.

All of the following are reasons that a corporation may purchase treasury stock except

--->The cost of treasury stock is a reduction in stockholders' equity. Dividends must still be paid on treasury stock because it is still issued. Treasury stock is reported as an asset because it is considered an investment in the corporation's own stock. Treasury stock is no longer considered issued once it is back in the hands of the issuer

Porter Hardware, Inc. issues $2 par common stock. Which of the following is true?

2$ per share is presented on the balance sheet in the common stock account

Coral Cleaners reported the following information in the stockholders' equity section of its December 31, 2011, balance sheet.Refer to the information presented above for Coral Cleaners, Inc. What is the number of shares of common stock issued and outstanding? 7% Cumulative, non-participatingpreferred stock, $100 par, 500 shares authorized, issued, and outstanding, callable at par value $ 50,000Common stock, $12 par, 100,000 shares authorized 600,000Additional paid-in capital25,000Retained earnings825,000

50,000 shares $600,000 / 12 par = 50,000 shares.

Murton Industries, Inc. reported the following information on its recent balance sheet.Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstandingRefer to the information for Murton Industries. What is the effect of a 2-for-1 stock split if the market value of the common stock is $20 per share at the time the stock split is declared?

A stock split has no impact on any of the stockholders' equity account balances.

If a corporation declares a 2-for-1 stock split, which of the following is true?

A stockholder who previously held 100 shares will have 200 shares after the split.

____________________ is the name of the account credited when a corporation issues common stock for a price greater than par

Additional Paid-In capital

Murton Industries, Inc. reported the following information on its recent balance sheet.Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstandingRefer to the information for Murton Industries. What is the effect on Murton's accounting equation of issuing 1,000 additional shares of common stock at $15 per share?

Assets increase $15,000, liabilities remain unaffected, and equity increases $15,000

The journal entry to issue 1,000,000 shares of $6 par common stock for $8.00 per share on January 2nd would be:

Cash 8,000,000 Common Stock 6,000,000 Additional Pain-in Capital 2,000,000

When a corporation declares a small stock dividend, which of the following is false

Cash decreases

Which of the following is not characteristic of a corporation?

Cash dividends paid by a corporation are deductible as expenses by the corporation.

Alma Corp. issues 1,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, a credit or credits are made to:

Common Stock $10,000 and Additional Paid-in Capital $6,000.

Brumfield, Inc. issued 7,000 shares of $1 par common stock for $20 per share. In addition to the increase in cash, what effectdoes this transaction have on Brumfield's accounting equation?

Common stock increases $7,000 and additional paid-in capital in excess of par increases $133,000.

The ____________________ is a preferred stock having a feature that provides for the current stated dividends plus dividends in arrears before any dividends are paid to the common stockholders

Cumulative stock

On January 15, 2011, Rockney Systems, Inc. paid a cash dividend that had been declared prior to the end of its 2010 fiscal year. The entry to pay the dividends includes a debit to:

Dividends Payable and a credit to Cash

When a corporation declares a stock dividend, which of the following is true?

Equity remains the same

When a corporation pays a previously declared cash dividend, which of the following is true?

Liabilities decrease.

After a corporation declares a cash dividend, what takes place on the date of record

No entry is necessary

he Sneed Corporation issues 10,000 shares of $50 par value preferred stock for cash at $70 per share. The entry to record the transaction will consist of a debit to Cash for $700,000 and a credit or credits to:

Preferred Stock for $500,000 and Additional Paid-in Capital for $200,000.

Which of the following statements is false regarding the issuance of stock versus bonds to raise capital for a corporation?

The declaration of dividends reduces the amount of the corporation's taxable income

If a corporation declares a 2-for-1 stock split, which of the following is true

The number of outstanding shares is twice the number that was outstanding before the split.

Which of the following statements is true with regard to equity capital

The number of shares actually in the hands of stockholders are called outstanding shares

Magnum Corporation had 60,000 of its $3 par common stock issued before its recent 3-for-1 stock split. The market price of the stock was $30 per share before the split. Which of the following is true as a result of the split?

The par value of the stock decreased to $1 per share.

If a corporation declares a 2-for-1 stock split, which of the following is true

The par value will be reduced to half of the pre-split par value

If a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders?

They have the right to receive current-year dividends and all unpaid dividends from prior years.

Prady, Inc. began operations on October 1, 2011, with 3,000 shares of $2 par common stock authorized. Prady issued all of its common stock during 2011 and 2012. On December 31, 2012, Prady repurchased 1,000 shares of its outstanding shares, then reissued 500 of these shares on March 1, 2013. On June 1, 2013, Prady declared a 2-for-1 stock split. As a result of this stock split, which of the following is true?

Total stockholders' equity remained the same

The ability of a corporation to obtain capital is

enhanced because of the limited liability and the ease of share transferability

The number of shares issued less the number of shares of treasury stock is the ____________________ shares.

outstanding

When stockholders exchange their shares of stock for additional shares, and there is a corresponding reduction in the par value of the stock, a stock ____________________ has occurred.

split

Earnings per share is an indication of how much:

the company earned for each share of outstanding common stock.

In which of the following organization forms are the owners' legal responsibility for the debt of the business limited to the amount they invested in the business?

Corporation

Select the type of business that is most likely to obtain large amounts of resources by issuing stock

Corporation

A disadvantage of the corporate form of business entity is:

Corporations are subject to more government regulations.

Which of the following is the appropriate general journal entry to record the declaration of a cash dividends?

Retained Earnings Dividends Payable

The ____________________ ratio is computed by dividing dividends by net income

dividend payout Common Dividends / Net Income

The ____________________ ratio is computed by dividing dividends per share by market price per share.

dividend yield

Treasury shares represent the:

number of previously issued shares that have been repurchased by the corporation.

Parnell, Inc. has 5,000 shares of $5 par, 3% cumulative preferred stock outstanding and 25,000 shares of $2 par common stock outstanding. No dividends have been paid for the past two years. If the company wishes to distribute $2 per share to the common stockholders, what is the total amount of dividends that must be paid in the current year?

$52,250

Murton Industries, Inc. reported the following information on its recent balance sheet.Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstandingRefer to the information for Murton Industries. What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the stock dividend is declared?

Retained earnings decreases by $225,000. (75,000 shares outstanding 10%); 7,500 (shares distributed) $30 (market price) = $225,000 reduction in retained earnings.

When a corporation decides whether to pay a cash dividend, which of the following is an important consideration?

The balances in the corporation's cash account to determine cash available for dividends.

Cash dividends paid on common stock would be reported in the statement of cash flows in:

the cash flows from financing activities section.

ssued stock that is repurchased by the corporation but not retired is ____________________

treasury stock