ACC200 - CH 13 LS

Zinc, Inc. has 10,000 shares of $5 oar, 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 ____________.

$2,500

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

- Charter fees - Legal fees

Identify the disadvantages of the corporate form of business.

- Government regulation - Corporate taxation

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

- Paid-In Capital - Retained Earnings

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

1 Stockholders 2 Board of directors 3 President, vice president, and other officers 4 Employees

Crystal, Inc. has 500 shares of outstanding $10 par common stock, with a current market value of $20 per share. Earnings per share is $2.00. The price-earnings ratio is ___________.

10

Ace, Inc.'s stockholders' equity applicable to preferred shares is $30,000. The number of common shares outstanding is 1,000 and the number of preferred shares outstanding is 300. The current market value for common stock is $80 per share and preferred stock is $95 per share. The book value per preferred share is _______.

100

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

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

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

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

Capital stock

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 distribution of stock will include a debit to the ______ account, in the amount of ______.

Common Stock Dividend Distributable; $5,000

________ stock typically includes preference for receiving dividends and for the distribution of corporate assets during a liquidation.

Preferred

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 _________ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held.

corporation

The entry to close the Income Summary account, when a company has net income, will include a (debit/credit) to the Retained Earnings account.

credit

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

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

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

credit; 150

Linus, Inc. holds 100 shares of treasury stock purchased for $10 per share. In March, Linus sold 50 shares at $30 per share. In December, Linus sold another 10 shares at only $5 per share. Using the cost method, the journal entry to record the transaction in December will include a (debit/credit) to Paid-In Capital, Treasury Stock in the amount of __________.

debit; $50

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 issues and outstanding and the market value was $5 per share. The entry to record this transaction would include a (debit/credit) to Retained Earnings in the amount of $______.

debit; 10,000

Dane, Inc. purchased 10 shares of its own $5 par value common stock for $20 per share. The journal entry to record this transaction would include a (debit/credit) to the Treasury Stock account in the amount of $_______.

debit; 200

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 the common stock dividend distributable account, in the amount on 0.

debit; 5,000

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

dividend

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

__________ preferred stock confers no right to prior period unpaid dividends.

noncumulative

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

Carefree, Inc. has 20,000 shares issued and outstanding. On August 1, the board authorizes a 20% stock dividend. This is considered a (large/small) stock dividend.

small

Mario, Inc. declares a 2-for-1 stock __________. This means that Mario will "call in" its outstanding shares and issue two shares in exchange for each old share of stock.

split

Stockholders have the right to _________ at stockholders' meetings.

vote

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?

- Common Stock - Paid-In Capital in Excess of Par Value

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

False

Maria Simmons owns 100 shares of $10 par, 5% participating preferred stock. Which of the following statements is true?

Maria will be entitled to $50 and may receive additional dividends.

Which of the following statements is false regarding stock splits?

Stock splits increase retained earnings.

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

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

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

Unlimited liability of stockholders

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

Darby. Inc. has 25,000 shares of stock issued and outstanding. All the shares of stock have the same rights and characteristics; therefore; the stock is called ________ stock.

common

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) to the preferred stock account in the amount of ________.

credit; $1,000

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

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 offered for $10 per share. The journal entry to record this transaction will include which of the following entries?

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

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

The board of directors of Anchor, Inc. authorizes a $0.50 cash dividend to its `00,000 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, Inc. decalres a 10% stock dividend when there are 10,000 shares of $1 oar 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 transaction with which of the following entries?

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

Identify the advantages of the corporate form of business.

- Ease of capital accumulation - Continuous life - Limited liability of stockholders

Ace, Inc.'s stockholders' equity applicable to preferred shares is $60,000. The number of common shares outstanding is 1,000 and the number of preferred shares outstanding is 500. The current market value for common stock is $80 per share and preferred stock is $95 per share. The book value per common share is $_______.

60

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

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

Retained earnings

Cameron, Inc. held 1,000 shares of its own $10 par value common stock purchased for $20 per share. In March, Cameron sold 10 shares at $20 per share. The journal entry to record the sale of treasury stock would include a (debit/credit) to Treasury Stock in the amount of __________.

credit; $200

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing 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

________ 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

(Cumulative/noncumulative) 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

_________ value stock is stick 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

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

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

stated

A ________ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.

stock

Keys, Inc. purchased 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

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 _______ account.

Retained earnings

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

debit; 50

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.

A corporation can purchase its own stock and retire it. Retiring stock reduced the number of ________ shares.

issued

A stock dividend that is greater than 25% of the previously outstanding shares of stock is considered to be a (small/large) stock dividend.

large

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

market