Orion 11

When a company records the issuance of common stock above the par value for cash

- it credits the par value under Common Stock and the remaining amount under Paid-In Capital in Excess of Par Value -it debits the amount received under Cash

Under capital stock on the balance sheet, a company includes information about

- par value -number of shares authorized and issued. -shares outstanding for each class of stock.

A cash dividend becomes a binding legal obligation on the date of record

False

Dividends in arrears on cumulative preferred stock should be recorded as a current liability until they are paid.

False

Peters Company has $20,000 of dividends in arrears, which are considered to be liabilities

False

The paid-in capital section of the balance sheet consists of two classifications of capital stock and retained earnings.

False

Treasury stock should be reported in the financial statements of a corporation as an investment.

False

Which of the following statements is true about the stockholders' equity section in the balance sheet?

It will report paid-in capital and retained earnings and identify the specific sources of paid-in capital on the date of record.

In the stockholders' equity section of the balance sheet, additional paid-in capital appears under the sub-section

Paid-In Capital

________________ remain unaffected when retained earnings are restricted.

Total remained earnings

A company would NOT acquire treasury stock as an asset investment.

True

One of the major disadvantages of the corporate form of organization is its high tax regulation.

True

Preferred stock has contractual preference over common stock in certain areas.

True

The life of a corporation, as stated in its charter, may be perpetual or it may be limited to a specific number of years.

True

When a company declares a dividend, the declaration will change the total of stockholders' equity.

True

In published annual reports, the individual sources of additional paid-in capital

are often combined

What is indicated in the corporation's charter?

authorized stock

Additional paid-in capital can come from the excess of amounts paid in over par and stated value of

both preferred and common stock

Harrison Corporation issues 39,000 shares of $50 par value preferred stock for cash at $60 per share. The effects of the transaction above will be under both __________________ and additional paid-in capital sections.

capital stock

Hadley Corporation issued 200,000 shares of $5 par value common stock for $25 per share. During that year, the corporation sustained a net loss of $40,000. The year-end balance sheet would show

common stock of $1,000,000. *(200,000 x $5 = $1,000,000)

A&M Corporation began business by issuing 125,000 shares of $10 par value common stock for $20 per share. During its first year, the corporation sustained a net loss of $8,000. The year-end balance sheet would show

common stock of $1,250,000. *(125,000 x $10 = of $1,250,000)

The cause for occasional restriction of retained earnings?

contractual loan restrictions

When preferred stock is cumulative, preferred dividends not declared in a given period are called

dividends in arrears

Market value is ________________ reported for each class of stock on the balance sheet.

generally not

When a company purchases treasury stock, restricting retained earnings is a

legal restriction

Which of the following would appear on a balance sheet under the category additional paid-in capital?

paid-in capital in excess of stated value

The cumulative feature of ______________ gives the preferred stockholders the right to receive current-year dividends and unpaid prior-year dividends before common stockholders receive any dividends.

preferred stock

The ______________________ on common stockholders' equity is computed by dividing net income available to common stockholders (Net income - Preferred dividends) by average common stockholders' equity.

return

Which of the following has the right of residual claim upon liquidation of the corporation?

stockholders

Placing a restriction on retained earnings decrease total stockholders' equity.

will not