ACC 303 EXAM 2
As a deduction from total stockholders' equity, following retained earnings
$21,050.
Which of the following entities would have a paid-in capital in excess of par (or stated) value account in the equity section of the balance sheet?
A corporation.
Which of the following statements best describes the term "par value?"
An amount used in determining a corporation's legal capital.
Where is treasury stock reported on a corporation's balance sheet?
As a deduction from total stockholders' equity, following retained earnings
Which form of business organization is established as a legal entity separate from its owners?
Corporation
The term "double taxation" refers to which of the following?
Corporations must pay income taxes on their net income, and their stockholders must pay income taxes on the dividends they receive from the corporation.
What is the difference between current liabilities and long-term liabilities?
Current liabilities are due within one year or an operating cycle, whichever is longer. Current liabilities, also called short-term liabilities
Ogilvie Corporation issued 16,000 shares of no-par stock for $50 per share. Ogilvie was authorized to issue 39,000 shares. What effect will this event have on the company's financial statements?
Increase assets by $800,000, increase stockholders' equity by $800,000.
How are bonds payable classified on the balance sheet?
Liability
Which of the following terms designates the maximum number of shares of stock that a corporation may issue?
Number of shares authorized
What accounts are involved when recording a taxable sale and the sales tax on that sale?
Taxable sale: +Assets= +Liabilities (Sales tax payable) + +Stockholders Equity (retained earning) ---- +Revenue = +Net income Sales tax: -Assets = -Liabilities (Sales tax payable)
What are the parties to a note payable known as?
The issuer/maker & the payee
On January 2, Year 1, Torres Corporation issued 20,000 shares of $10 par-value common stock for $11 per share. Which of the following statements is true?
The paid-in capital in excess of par value account will increase by $20,000.
Which of the following is not normally a preference given to the holders of preferred stock?
The right to vote before the common stockholders at the corporation's annual meeting.
Which of the following statements is a reason why a company would buy treasury stock?
To avoid a hostile takeover, To have stock available to issue to employees in stock option plans, To have stock available to issue to employees in stock option plans.
Which of the following is a negative or contra equity account?
Treasury stock
A corporation is a legal entity created by the authority of a state government, separate and distinct from its owners.
True
A corporation is not terminated upon withdrawal of a stockholder, but a partnership is terminated upon withdrawal of a partner.
True
A distribution by a sole proprietorship to the owner is called a withdrawal.
True
A separate capital account would be maintained for each partner in a partnership.
True
Corporations are typically subject to greater governmental regulations
True
Liability is a significant disadvantage of the partnership form of business organization.
True
While a sole proprietorship is not a separate legal entity from its owner, it is a separate accounting entity.
True
Partnerships
allow persons to share their talents, capital and risks and rewards of ownership. Two or more individuals share ownership.
Sole proprietorships
are owned by a single individual who is responsible for making business and profit distribution decisions. Usually no legal ownership agreement is required.
A partnership agreement
defines responsibilities and describes how income or losses will be divided.
Ix Company issued 18,000 shares of $10 par value common stock at a market price of $22. As a result of this accounting event, the amount of stockholders' equity would:
increase by $396,000.
A corporation
is a separate legal entity created by the authority of a state government. All states require the application to provide articles of incorporation.
The issuance of a stock dividend will:
not affect total equity.
Know how to compute the interest expense to be reported EACH year of a long-term note payable.
note payable * interest rate / x months * x months
When the common stock account is disclosed on the balance sheet, it is reported at:
par or stated value.
