Chapter 11 Review, Quiz, and RSP

Which one of the following is not necessary in order for a corporation to pay a cash dividend?

Approval of stockholders.

Which one of the following is not a right of preferred stockholders?

Priority voting rights Preferred stockholders usually have no voting rights.

If everything else is held constant, what will cause earnings per share to increase?

The purchase of treasury stock The purchase of treasury stock reduces the number of shares outstanding, which is the denominator of EPS. With a smaller denominator, earnings per share is larger.

For what reason might a company acquire treasury stock?

To reissue the shares to officers and employees under bonus and stock compensation plans This is one of the reasons why treasury stock is purchased, but it's not the only reason.

The board of directors of Sheridan Company declared a cash dividend of $1 per share on 34000 shares of common stock on July 15, 2017. The dividend is to be paid on August 15, 2017, to stockholders of record on July 31, 2017. The correct entry to be recorded on August 15, 2017, will include a

debit to Dividends Payable.

A disadvantage of the corporate form of business is government regulation. ease of transfer of ownership. continuous existence. its status as a separate legal entity.

government regulation.

Par value: represents what a share of stock is worth. represents the original selling price for a share of stock. is the value assigned per share in the corporate charter. is established for a share of stock after it is issued.

is the value assigned per share in the corporate charter.

The following data is available for Kingbird, Inc. at December 31, 2017: Common stock, par $10 (authorized 28000 shares) $196000 Treasury stock (at cost $15 per share) $975 Based on the data, how many shares of common stock are outstanding?

19535.

the following data is available for BOX corp at Dec 31 21014: common stock, par $10 (authorized 30,000 shares) $250k less: treasury stock (at cost $15 per share) $1,200 Based on the data, how many shares of common stock are issued?

25,000 25,000 actually issued out of the 30,000 authorized

what is the total stockholders equity based on the following account balances? common stock $750k Paid-in capital in excess of par 50,000 retained earnings 175,000 Treasury stock 25,000

950,000 add common stock, add paid-in capital, add retained earnings, subtract treasury stock

When stock dividends are declared and issued, total stockholders' equity increases. T/F

False When stock dividends are declared and issued, total stockholders' equity remains the same.

Treasury stock is

a corporation's own stock, which has been reacquired and held for future use. Outstanding stocks are the stocks belonging to all the shareholders. Issued stock is the total shares issued including the outstanding shares and treasury stock. That is authorized stock. Not the same as the amount of shares that the actual company sells. Allowed to sell 100,000 but maybe only selling 50,000 Authorized stock, issued stock, and outstanding stock Outstanding stock: all the shares that have been issued by the company that belong to an investor You can buy shares back from investors Treasury stock: buying back shares Authorized: 100,000 Issued: 50,000 Outstanding: 80,000 Treasury stock: 5,000 Par value: some minimum amount that's given to a stock

The amount of stock that may be issued according to the corporation's charter is referred to as the

authorized stock

Johnson Company issued 900 shares of no-par common stock for $15,300. Which of the following journal entries would be made if the stock has no stated value?

cash 15,300 common stock - no par value 15,300

Dehesa, Inc. has 8,000 shares of 5%, $50 par, cumulative preferred stock and 50,000 shares of $3 par common stock outstanding. No dividends were declared last year, However, the board of directors just declared a $50,000 dividend this year to be paid in 10 days. What amount of the total dividend will be paid to common stockholders?

$10,000 Before the common stockholders receive any dividends, preferred dividends should first be distributed for the dividends in arrears in the prior year and the current year.Total dividend = 8,000 × 5% × $50 = $20,000/year Preferred dividends in arrears for one year$20,000Preferred for current year20,000Total dividends to preferred stockholders40,000Total dividends available(50,000)Dividends available to common stockholders$10,000

If a corporation issues 1,000 shares of $3 par common stock for $7 a share, how much is the legal capital?

$3,000 The legal capital is the par value per share ($3) times the number of shares issued (1,000) or $3,000. This will be equal to the total reported in the stock account.

Metlock, Inc. issues 6000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to: Common Stock $84000. Common Stock $60000 and Paid-in Capital in Excess of Par Value $24000. Common Stock $60000 and Retained Earnings $24000. Common Stock $60000 and Paid-in Capital in Excess of Stated Value $24000.

Common Stock $60000 and Paid-in Capital in Excess of Par Value $24000.

Concord Corporation began business in 2017 by issuing 99000 shares of $5 par common stock for $8 per share and 17000 shares of 5%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2017 balance sheet, Concord would report Paid-In Capital of $765000. Common Stock of $495000. Common Stock of $990000. Common Stock of $792000.

Common Stock of $495000.

Harrison, Inc. issued 4,000 shares of common stock at $12 per share. If the stock has a par value of $0.50 per share, which of the following will be part of the journal entry to record the issuance?

Credit to Common Stock for $2,000 The journal entry will increase the cash account for the total issue price, increase the common stock account for the par value per share times the number of shares issued, and increase paid-in capital in excess of par value for the excess received above par value.Debit to Cash = 4,000 × $12 = $48,000Credit to Common stock = 4,000 × $0.50 = $2,000Credit to Paid-in capital in excess of par value = 4,000 × ($12 - $0.50) = $46,000

The stockholders of a corporation have unlimited liability. T/F

False The liability of a stockholder is normally limited to their investment in the corporation.

Which of the following is a disadvantage of the corporate business form?

Government regulation Because a corporation is a separate legal entity and because of the government's desire to protect stockholders, corporations are heavily regulated.

Which of the following increases when a corporation purchases treasury stock?

Number of treasury shares Treasury shares increase when treasury stock is purchased.

If Sheffield Corp. issues 8500 shares of $5 par value common stock for $212500, the account Common Stock will be credited for $212500. Paid-in Capital in Excess of Par Value will be credited for $42500. Paid-in Capital in Excess of Par Value will be credited for $170000. Cash will be debited for $170000.

Paid-in Capital in Excess of Par Value will be credited for $170000.

Alt Corp. issues 3,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:

common stock $30,000 and paid-in capital in excess of par value $12,000 3,000 x 10 = 30,000 common stock

Holden Packaging Corporation began business in 2014 by issuing 80,000 shares of $5 par common stock for $8 per share and 20,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2014 balance sheet, Holden Packaging would report

common stock of $400,000 shares x par value when calculating for common stock

the chief accounting officer in a company is known as the

controller

a corporation records a dividend-related liability

on the declaration date (record date = no journal entry)

The number of shares of issued stock equals

outstanding shares plus treasury shares outstanding stock: all the shares that have been issued by the company that belong to an investor

If Norben Company issues 4,000 shares of $5 par value common stock for $140,000, the account

paid-in capital in excess of par value will be credited for $120,000 $5x4,000=total amount of par value issue price - par value paid in cap in excess of par = 140k - 20k

The board of directors of Bosco Company declared a cash dividend on November 15, 2017, to be paid on December 15, 2017, to stockholders owning the stock on November 30, 2017. Given these facts, the date of November 30, 2017, is referred to as the

record date.