accounting chapter 21-22

bonds that are payable over a period of years are called:

b. serial bonds

where does the corporate income tax appear in the income statement

income tax expense is usually shown as a deduction at the bottom of the income statement, after net income before tax, but is sometimes shown as an operating expense to emphasize that taxes are a cost of doing business

retained earnings

the cumulative profits and losses of the corp not distributed as dividends

declaration date

the date on which the board of directors officially declares a dividend

if bonds are issued for price below their face value, the bond discount is:

b. amortized over the life of the bond issue

the balance of an appropriated retained earnings account is reduced:

c. a board resolution is necessary to reduce appropriated retained earnings

the entry to record retirement of a bond includes a debit to:

c. bonds payable

the entry to record income earned by a bond sinking fund investment include a credit to:

c. income from sinking fund investment

the entry to record the issuance of bonds includes a:

d. credit to Bonds Payable

bonds backed only by the general credit of the corporation are called:

d. debentures

which of the following would not be found on the statement of retained earnings

d. the cash payment made when the corporation completes construction of a building for which an appropriation of retained earnings had been made

explain each of the three dates related to a cash dividend declaration and issue

date of declaration: date the board of directors formally announces the dividend date of record: date on which owners of stock are determined and to whom dividends will be paid date of payment: date on which payment is to be made

how are bond discounts shown on the balance sheet

discount on bonds payable is shown on the balance sheet as a deduction from the face value of the bonds

stock dividend

distribution of the corp's own stock on a pro rata basis that results in conversion of a portion of the firm's retained earning to permanent capital

does an appropriation of retained earnings include a transfer of cash to a restricted account

no cash is involved in an appropriation of retained earnings. cash is involved only if a separate fund is established to pay for the object of the appropriation

which of the following will decrease total stockholders' equity

of these actions, only a cash dividend (c) will result in a decrease in stockholder's equity

what does the account retained earnings represent

retained earnings represent the cumulative;ative profits and losses of the corporation that have not been distributed as dividends or transferred to Paid-in capital through cash dividends, stock dividends, or stock splits

book value

the total equity applicable to a class of stock divided by the number of shares outstanding

the balance for retained earnings on December 1 is 300000 during December dividends of 15,000 on common stock and 10,000 on preferred stock were declared. neither dividend was paid in December. an appropriation for building expansion account with a balance of 100,000 was closed and the balance transferred back to retained earnings. net income after taxes id 90,000. what is the balance of unappropriated retained earnings on December 31

$465,000

ten-year bonds, dated January 1, 2019, with a face value of $100,000 are issued at 101 on January 1, 2019. how much premium will be amortized on the interest payment due July 1, 2019

$50 (1,000/10=$100yr or $50 payment date)

on April 20, the board of directors of Auto Corporation declared a 15 percent stock dividend payable on June 1 to stockholders of record on May 15. the stock expected to trade at $35 per share. on the declaration date there are 4000 shares outstanding. the par value of the shares is $30. what amount is credited to the paid-in-capital in excess of par value common stock account

(600x$5)=3,000

a small corporation is considering a bond issue. the amount of stock-holder's equity is $25,000. the corp projects income before bond interest and taxes of $60,000. the corporate income tax rate is 20 percent. if $125,000 of bonds is issued at 10 percent, what is the rate of profit on stockholder's equity

15.2% (38,000/250,000)

a corporation's taxable income for 2019 was 250,00. using the corporate tax rates shown under "federal income tax rates" compute the total federal income tax expense for the year

80,750

paid-in capital

Capital acquired from capital stock transactions (also known as contributed capital)

what is a convertible bond

a bond that may be converted into common stock, under specified conditions, at the option of the owner

treasury stock

a corporation's own capital stock that had been issued and reacquired; the stock must have been previously paid in full and issued to a stockholder

what is a bond sinking fund investment

a fund used to accumulate assets to pay off bonds when they mature

treasury stock is shown on the balance sheet as:

a. a deduction from the sum of all other items in the stockholders' equity section