Ch. 10

On January 1, Year 3, Boxwood, Incorporated issues 1,000 shares of $1 par value common stock for $30 per share. Later that year, the company issues 1,000 shares of $10 par value preferred stock for $80 per share. The company's balance sheet as of December 31, Year 3, will show total paid-in capital of:

110000 Correct. Total paid-in capital as of December 31, Year 3 is $110,000 (common stock of $1,000 + preferred stock of $10,000 + additional paid-in capital of $99,000).

Marine Corporation issued common stock in Year 1. It issued 10,000 shares of 10%, $100 par value noncumulative preferred stock for $110 per share at the beginning of Year 3. It did not pay any dividends in Year 3 or Year 4. In December of Year 5, it declares total dividends of $250,000. How much will the common stockholders of Marine Corporation receive as dividends in Year 5?

150000 Correct. Because preferred stock is noncumulative, preferred stockholders receive only the annual dividend of $100,000 (= 10,000 shares x 10% x $100). Common stockholders will receive the remaining $150,000.

Lego, Incorporated, issued common stock in Year 1. It issued 10,000 shares of 8%, $100 par value cumulative preferred stock for $110 per share at the beginning of Year 4. It did not pay any dividends during Year 4. In December of Year 5, it declares total dividends of $200,000. How much will the preferred stockholders of Lego receive as dividends in Year 5?

160000 Correct. Annual preferred dividends total $80,000 (= 10,000 shares x 8% x $100). The preferred stockholders will receive $160,000 (= $80,000 in arrears + $80,000 for Year 5).

Innovative Media issues 1,000 shares of 8%, $50 par value preferred stock for $60 per share. Which of the following will be recorded at the time of the issue?

A credit to APIC for 10000 Correct. Cash will be debited for $60,000, Preferred Stock will be credited for the $50,000 par value, and Additional Paid-in Capital will be credited for $10,000.

what increases when treasury stock is resold for more than its original cost?

APIC

when a corporation acquires shares of its own common stock, it records a...

Debit to treasury stock for cost

If losses exceed income since the company began operations, Retained Earnings will have a credit balance. T/F

False If losses exceed income since the company began operations, Retained Earnings will have a debit balance.

when a corporation issues stock to the general public for the first time

Initial public offering

shares actually sold, which includes treasury stock

Issued stock

are privatly held corporations allowed to have investments by the general public?

No

is there any relationship between the par value and market value of common stock?

No

what are all publicly held corporations regulated by?

Securities and exchange commission

Dividends paid are allocated according the oth percentage of shares owned by each stockholder T/F

True

Preferred stock is "preferred" to common stock in two ways: (1) preferred stockholders have first rights to dividends, and (2) in the event the company is dissolved, preferred stockholders receive preference over common stockholders in the distribution of assets. T/F

True

The balance in retained earnings equals all net income, less all dividends, since the company began operations. T/F

True Retained earnings represent the earnings not paid out as dividends to stockholders over the life of the company.

total number of shares available to sell

authorized stock

a corporations officers are appointed by who

board of directors

On January 1, Year 1, Davidson Corporation issues 1,000 shares of $1 par value common stock for $20 per share. Issuance of common stock JE?

cash 20,000 common stock 1000 APIC 19000

What has higher assets and earnings, a corporation or sole proprietorship

corporation

Marina, Incorporated, acquires 1 million shares of its own $1 par value common stock at $70 per share. It later resells the 1 million shares of treasury stock for $75. We record the $5 difference per share as a:

credit to APIC These shares originally were purchased for $70 per share, so the $75 resale price represents a $5 per share increase in additional paid-in capital.

Delta Corporation acquires 10,000 shares of its own $0.01 par value common stock at $10 per share. It later resells the 10,000 shares of treasury stock for $12. The entry to record this transaction will involve a:

credit to APIC for 20000 The journal entry will include a debit to Cash for $120,000 (= 10,000 shares × $12 per share), a credit to Treasury Stock for $100,000 (= 10,000 shares × $10 per share), and a credit to Additional Paid-in Capital for the difference, $20,000.

Issuance of common stoch JE

debit cash credit common stock credit additional paid in capital

Almond Corporation acquires 10,000 shares of its own $1 par value common stock at $10 per share. The journal entry for this transaction includes a:

debit to Treasury Stock for $100,000 When a corporation repurchases its own stock, it increases (debits) Treasury Stock, while it decreases (credits) Cash. Specifically, the journal entry will include a debit to Treasury Stock and a credit to Cash for $100,000 (= 10,000 shares × $10 per share).

Primary disadvantages of the corporate form of business compared to proprietorship or partnership

double taxation, more paperwork

Fairfield Corporation issues 100,000 shares of $1 par value common stock for $10 per share. This transaction:

increases assets and increases stockholders equity

Primary advantages of the corporate form of business compared to a sole proprietorship/partnership

limited liability, ability to raise capital

shares held by investors

outstanding stock

what date associated with dividends does not require an entry to be recorded?

record date

Earnings not distributed as dividends to stockholders are known as

retained earnings

Components of stockholders equity

retained earnings, paid in capital, treasury stock