Chapter 13 for Accounting #2

Stock

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

Premium

A __________ on stock occurs when a corporation issues its stock for more than par (or stated) value.

a. debit; $500

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 (debit/credit) to the Retained Earnings account, in the amount of __________. a. debit; $500 b. debit; $1,000 c. credit; $500 d. credit; $1,000

Stock

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

Privately and Publicly

Corporations can be separated into two types. A __________ held corporation does not offer its stock for public sale and usually has few stockholders. A __________ held corporation offers its stock for public sale and can have thousands of stockholders.

Debit; $200

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 $__________.

Cash; $800

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 __________.

d. Common Stock, $1 par; $100

Payton, Inc.'s charter authorized 100,000 shares of stock with a par value of $1 per share. Payton issues 100 shares at a market value of $5 per share. The journal entry to record this transaction will include a credit to __________ in the amount of __________. a. Paid-in Capital, in Excess of Par; $500 b. Common Stock, $1; $500 c. Cash; $500 d. Common Stock, $1 par; $100

Paid-In Capital

Philip's Inc. reports stockholders' equity on its financial statements. The two items reported in the stockholders' equity section of Philip's balance sheet are __________ Capital and Retained Earnings.

3, 4, 1, & 2

Rank the following groups in order of authority--with the highest authority at the top. 1) President, vice president, and other officers 2) Employees 3) Stockholders 4) Board of directors

b. dividend in arrears

When stock is cumulative preferred stock and the board of directors does not declare a dividend, the unpaid dividend amount is called: a. dividend payable b. dividend in arrears c. dividend distributable

Payment

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 __________.

a. Unlimited liability of stockholders

Which of the following is not a characteristic of a corporation? a. Unlimited liability of stockholders b. Government regulation c. Continuous life d. Transferable ownership rights e. Corporate taxation

b. Stock splits increase retained earnings

Which of the following statements is false regarding stock splits? a. Stock splits decrease the par value of each share of stock b. Stock splits increase retained earnings c. Stock splits increase the number of shares of stock issued

a. Common Stock Dividend Distributable; $5,000

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 __________. a. Common Stock Dividend Distributable, $5,000 b. Common Stock; $100,000 c. Common Stock Dividend Distributable; $100,000 d. Common Stock; $5,000

Common stock

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.

2 & 4

Identify the disadvantages of the corporate form of business. *(Check all that apply)* 1) Transferable ownership rights 2) Government regulation 3) Lack of mutual agency 4) Corporate taxation 5) Limited liability

d. Paid-in Capital, in Excess of Par; $8,000

Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200 shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to record this transaction in the books of Damian, Inc., will include a credit to __________ in the amount of __________. a. Cash; $10,000 b. Paid-in Capital, in Excess of Par; $10,000 c. Common Stock; $10,000 d. Paid-in Capital, in Excess of Par; $8,000

Credit; $500

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 to record this transaction will include a (debit/credit) to Common Stock, for $__________.

$125; arrears

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 __________.

Credit; $100

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 $__________.

c. at any price

No-par value stock is stock not assigned a value per share by the corporate charter. Its advantage is that is can be issued __________ without the possibility of a minimum legal capital. a. only to preferred stockholders b. only to friends and family c. at any price

3, 4, 5, & 7

Of the following statements, which are true for the corporate form of organization? *(Select all that apply)* 1) Ownership rights cannot be easily transferred 2) Owners have unlimited liability for corporate debts 3) Capital is more easily accumulated than with most other forms of organization 4) Corporate income that is distributed to shareholders is usually taxed twice. 5) It is separate legal entity 6) It has a limited life 7) Owners are not agents of the corporation

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; $500

Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, $__________.

Credit; $10

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 a (debit/credit) to the Common Stock, $1 par account in the amount of $__________.

True

True or false: Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.

a. Date of record

When a corporation declares and pays a cash dividend, there are three notable important dates. Which date does not require a formal journal entry to the financial statements? a. Date of record b. Date of payment c. Date of declaration

b. treasury

When a corporation purchases shares of its own stock, it is called __________ stock. a. preferred b. treasury c. convertible d. callable

Noncumulative

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

25%

A small stock dividend is a distribution of __________% or less of previously outstanding shares.

c. 25,001

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. a. 50,001 b. 20,001 c. 25,001 d. 30,001

Debit; $10,000

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 would include a (debit/credit) to Retained Earnings in the amount of $__________.

Credit

On June1, 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 required on the date of declaration will include a (debit/credit) to the Common Dividend Payable account.

1 & 4

Organization expenses, or the costs to organize a corporation, include which of the following? *(Check all that apply)* 1) Legal fees 2) Depreciation 3) Dividends 4) Charter fees

Par value of stock

The __________ value of stock is an amount assigned per share by the corporation in its charter. In many states, this amount establishes the minimum legal capital, which refers to the least amount that the buyers of stock must contribute or be subject to paying at future dates.

Dividend

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

3 & 4

The board of directors of Anchor, Inc. authorizes a $0.50 cash dividend 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? *(Check all that apply)* 1) Debit to Cash 2) Credit to Retained Earnings 3) Debit to Common Dividend Payable 4) Credit to Cash 5) Debit to Retained Earnings 6) Credit to Common Dividend Payable

Debit

The closing process requires that end of the year revenue accounts are close with a (debit/credit).

a. Par value

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? a. Par value b. Expected future earnings c. Dividends d. Growth

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

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 will total __________. a. $750 b. $2,500 c. $500

1 & 5

Zion, Inc. declares a 10% stock dividend when there are 10,000 share of $1 par 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? *(Check all that apply)* 1) Debit to Common Stock Dividend Distributable for $1,000 2) Debit to Common stock Dividend Distributable for $5,000 3) Credit to Cash for $5,000 4) Credit to Common Stock for $5,000 5) Credit to Common Stock for $1,000

Retained Earnings

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

Authorized Stock

__________ 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.

Preferred

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

b. Stated value stock

__________ value stock is no-par stock to which the directors assigned a certain value per share. This value becomes the minimum legal capital per share in this case. a. General b. Stated c. Adjusted-par