AC ch 12 and 13
Jam and Ham have decided to form a partnership. Assume that the company is anticipating net income of $100,000 for the first time period. What would be Jam's share of the $100,000 if there is no agreement on how to divide the net income. Jam is investing $40,000 and Ham $60,000.
$50,000
A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 2% stock dividend on a date when the market price was $11 per share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?
$8,800
A corporation has issued 100,000 shares of $10 par common stock and holds 10,000 of these shares as treasury stock. If the corporation declares a $1 per share cash dividend, what amount will be recorded as cash dividends?
$90,000
The date on which a cash dividend becomes a binding legal obligation is the
declaration date
Assess the truth of this statement: One of the rules of debits and credits and account balances for a partnership is that liabilities increase as debits
false
One disadvantage of a corporation is continuous life.
false
What are the shares of ownership of a corporation called?
stock
What term refers to those who own stock of a corporation?
stockholders
A charter is approved and issued from the state that it is to be incorporated in?
true
Assess the truth of this statement: For a partnership entity, partnership equity is composed of one capital account for each partner.
true
What term is used to describe the characteristic of a business entity where an individual(s) associated with an entity can not only lose all of his/her investment in the firm but personal assets can be taken to pay the debts of the firm if necessary?
unlimited liability
Jam and Ham have decided to form a partnership. They are in the process of agreeing on how the profits/losses will be divided. Assume that the company is anticipating net income of $100,000 for the first time period. Assume that Jam is to have a salary of $20,000 and Ham is to have a salary of $40,000 for this time period. In addition, Jam is to invest $40,000 and Ham is to invest $60,000. What would be Jam's share of the $100,000 if interest at the rate of 10% is to be allowed on each partner's investment, the salary allowances are to be included, and the remaining net income is to be divided equally between the partners?
$39,000
For a partnership, assume for a certain time period, the Income Statement has Sales of $100,000 and Cost of merchandise sold of $60,000, what is the gross profit for this time period?
$40,000
Assume that Em and Bo are forming a partnership. Em will invest cash of $50,000 and Bo will invest a piece of equipment with a book value of $40,000 and a fair market value of $55,000. At what amount will the Em's capital account be recorded?
$50,000
When a statement of partnership equity is prepared, which of the following statements is accurate?
-Each partner has a capital column to reflect his/her ownership interest in the firm. -Each partner's capital column is increased by his/her share of the net income for the time period. -Each partner's capital column is decreased by his/her drawing account balance for the time period.
All of the following are normally found in a corporation's Stockholders' Equity section of the balance sheet except
Dividends in Arrears
If common stock is issued for an amount greater than par value, the excess should be credited to
Paid-In Capital in Excess of Par
Sunshine Corp. was organized on Jan. 1 with authorization of 20,000 shares of $5 preferred stock, $100 par, and 200,000 shares of $25 par common stock. Indicate the accounts that should be recorded in the Description column of the Journal item (2) as the credit accounts and for what amounts assuming that Sunshine Corp. received cash for the issuance of 800 shares of preferred stock at $130 per share.
Preferred Stock credited for $80,000 and Paid-In Capital in Excess Par - Preferred Stock credited for $24,000
When preparing a Balance Sheet for a partnership, Total Assets must equal what?
Total Liabilities and Partners' equity
When preparing the stockholders' equity section of the balance sheet, assume that the following accounts have normal balances. Which of these account balances would not be an addition to the Paid-In Capital section?
Treasury Stock (debit balance)
For a partnership, which of the following account is not a current asset?
accounts payable
What is the number of shares of stock that the corporation can issue over the life of its charter called?
authorized shares
The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called
authorized stock
Those most responsible for the major policy decisions of a corporation are the
board of directors
After a company receives a charter, what are the rules and procedures prepared by the corporate management and the board of directors for conducting the corporation's affairs called!
bylaws
Assume a company with an authorization of 20,000 shares of $25 par common stock and issuance of 20,000 shares had reacquired 1,000 shares of their own common stock at $45 per share. Indicate the accounts that should be recorded in the Description column of the Journal item (1) as the account to be debited for the $12,000 if it reissues 200 shares of the treasury stock at $60 per share.
cash
Sunshine Corp. was organized on Jan. 1 with authorization of 10,000 shares of preferred stock, $100 par, and 100,000 shares of $20 par common stock. Indicate the account that should be recorded in the Description column of the Journal item (1) as the debit account for the $1,000,000 assuming that Sunshine Corp. received cash for the issuance of 50,000 shares of common stock at par.
cash
Sunshine Corp. was organized on Jan. 1 with authorization of 20,000 shares of $5 preferred stock, $100 par, and 200,000 shares of $25 par common stock. Indicate the account that should be recorded in the Description column of the Journal item (1) as the debit account for the $104,000 assuming that Sunshine Corp. received cash for the issuance of 800 shares of preferred stock at $130 per share.
cash
Retained earnings
changes are summarized in the retained earnings statement
What is the legal document received from a state granting a corporation a legal right to exist called?
charter
If a company issues only one class of stock, what is this kind of stock called?
common stock
Sunshine Corp. was organized on Jan. 1 with authorization of 10,000 shares of preferred stock, $100 par, and 100,000 shares of $20 par common stock. Indicate the account that should be recorded in the Description column of the Journal item (2) as the credit account for the $1,000,000 assuming that Sunshine Corp. received cash for the issuance of 50,000 shares of common stock at par.
common stock
What type of business entity generate more than 90% of the total business dollars in the United States?
corporation
Which of the following statements correctly gives the account to be debited and the account to be credited when journalizing a partner's withdrawal of cash for personal use?
debit the partner's drawing account and credit cash
The par value per share of common stock represents the
dollar amount assigned to each share
The board of directors for a corporation is elected by ?.
elected by the stockholders
Assess the truth of this statement: For a partnership entity, the Balance Sheet is not one of the financial statements that should be prepared at the end of an accounting period
false
Assess the truth of this statement: For a partnership entity, the accounting equation is not applicable.
false
Assess the truth of this statement: For a partnership, when journalizing using a general journal, if a transaction has more than one account to debit and/or credit for the same transaction,all credit account(s) are recorded first followed by the debit account(s).
false
Assess the truth of this statement: The first closing entry requires a debit to the revenue account(s) for its balance, a debit to the capital account of each partner for his/her share of the net income, and a credit to the expense account(s) for the sum of the debits.
false
Assess the truth of this statement: The transaction of a partnership that is recording cash invested by a partner should be recorded as a debit to cash and a credit to the individual partner's drawing account.
false
Since a proprietorship is a 'not taxable' for income tax purposes, no reporting is necessary on the income tax return.
false
Assess the truth of this statement: One of the rules of debits and credits and account balances for a partnership is that increases in revenue accounts are always debited to the revenue account.
fasle
What is the first step in forming a corporation?
file an application of incorporation
The two main sources of stockholders' equity are
investments by stockholders and net income retained in the business
Par value
is the monetary value assigned per share in the corporate charter
What term is used to refer to denote that creditors usually may not go beyond the assets of the corporation to satisfy their claims?
limited liability
A form of legal entity that provides limited liability to its owners but is treated as a partnership for tax purposes is called what?
limited liability company (LLC)
What is the process called where a partnership sells the assets, pays the creditors, and distributes the remaining cash or other assets to the partners?
liquidation
What is the characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts called
mutual agency
Which of the following is a disadvantage of the corporate form of organization?
owner is separate from management
For a partnership, which of the following is not a classification of assets on the Balance Sheet?
partners equity
For federal income tax purposes, what term refers to the business entity not being a separate entity from the owners? This type of entity is not taxed but the owner(s) must record the earnings from the business on his/her individual income tax return.
pass-through entity
A form of legal entity that is owned by a single individual is called what?
proprietorship
What term is used to refer to a corporation whose shares are traded in a public market
public
What is net income retained in a corporation called?
retained earnings
Characteristics of a corporation include
shareholders who have limited liability
Which of the following is NOT a characteristic of a partnership?
simple to form
Assess the truth of this statement: For a partnership entity, the income statement format is the same as previous chapters except a section following the final net income is added that shows a division of net income to the partners.
true
Assess the truth of this statement: For a partnership entity, the statement of cash flows format is the same as previous chapters.
true
Assess the truth of this statement: For a partnership, when a transaction is first recorded (put in a journal) every transaction affects at least two accounts, one account(s) will be debited and the other account(s) will be credited.
true
Assess the truth of this statement: If a partner makes a withdrawal of cash during the time period, the second closing entry requires a debit to the individual capital account balance and a credit to the drawing account for the respective partner.
true
Assess the truth of this statement: One of the rules of debits and credits and account balances for a partnership is that assets increase as debits.
true
Assess the truth of this statement: One of the rules of debits and credits and account balances for a partnership is that increases in expense accounts are always debited to the expense account.
true
Assess the truth of this statement: One of the rules of debits and credits and account balances for a partnership is that the normal balance side and the increase side of every account is always the same side.
true
Assess the truth of this statement: One of the rules of debits and credits and account balances for a partnership is that when recording a transaction for a receipt of cash, the cash account is always debited for the amount of cash received.
true
Assess the truth of this statement: The day-by-day transactions of a partnership are recorded in accordance with the double-entry accounting concepts and are recorded exactly like transactions in previous chapters except for those involving the owners' capital accounts and drawing accounts.
true
One disadvantage of a corporation is double taxation of dividends.
true
One major advantage of a corporation is its ability to raise large amounts of capital.
true
Partners have co-ownership of partnership property.
true
Raising large amounts of capital is more difficult for a partnership than for a corporation.
true
The accounting equation for a corporation is Total Assets = Liabilities + Stockholders' Equity.
true
A corporation purchased 1,000 shares of its own $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What amount of revenue is realized from the sale?
$0
R Howell contributed equipment, inventory, and $34,000 cash to a partnership. The equipment had a book value of $11,000 and a market value of $17,000. The inventory had a book value of $60,000 but only had a market value of $15,000 due to obsolescence. In the journal entry to record Howell's contribution to the partnership, for what amount should inventory be debited?
$15,000
Kansas Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. The stock is widely traded and selling for $15 per share. At what amount should the building be recorded by Kansas Company?
$180,000
YoYo Company earned $420,000 during 20Y7 using 20 employees. What is the revenue per employee for this year?
$21,000
For a partnership, assume for a certain time period, the Income Statement has Sales of $100,000, Cost of merchandise sold of $60,000, and Total Operating expenses $15,000, what is the net income for this time period?
$25,000
Sunshine Corp. was organized on Jan. 1 with authorization of 20,000 shares of $5 preferred stock, $100 par, and 200,000 shares of $25 par common stock. Indicate the account on Dec. 1 that should be recorded in the Description column of the Journal item (2) as the account to be credited and the amount assuming that Sunshine Corp. declared the annual dividend on the preferred stock with 10,000 shares of the preferred stock having been issued. Sunshine Corp. is not declaring a dividend on the Common Stock
Cash Dividend Payable credited for $50,000
Sunshine Corp. was organized on Jan. 1 with authorization of 20,000 shares of $5 preferred stock, $100 par, and 200,000 shares of $25 par common stock. Indicate the account on Dec. 1 that should be recorded in the Description column of the Journal item (1) as the account to be debited and the amount assuming that Sunshine Corp. declared the annual dividend on the preferred stock with 10,000 shares of the preferred stock having been issued. Sunshine Corp. is not declaring a dividend on the Common Stock
Cash Dividend debited for the amount of $50,000
In which section of the financial statements would Paid-In Capital from Sale of Treasury Stock be reported?
Stockholders' Equity section of the balance sheet
In the realization process for a partnership if an asset is sold for more than book value that is recorded in the accounting records, select the statement that correctly describes this transaction.
There is a gain on realization
Which of the following statements correctly describes the affect on the division of the partnership net income if the articles of partnership provide for a salary allowance of $9,000 per month to partner B, and partner B only withdrew $6,000 per month?
There is no affect on Partner B's share of net income because the amount of one does not affect the amount of the other.