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Cloud Company has 5,000 shares of 6%, $20 par value noncumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2. In Year 3, Cloud paid $30,000 of cash dividends. What was the amount of dividends paid to preferred stockholders?

$6,000 Reason: 5,000 shares × $20 × 6% = $6,000 annual preferred dividend. Since the preferred stock is noncumulative, there are no dividends in arrears.

Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Immediately after the issue, Base Line's legal capital is

150,000

Cloud Company has 5,000 shares of 6%, $20 par value cumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2. In Year 3, Cloud paid $30,000 of cash dividends. What was the amount of dividends paid to common stockholders?

5,000 shares × $20 x 6% = $6,000 annual × 3 years = $18,000 due to preferred stockholders. $30,000 total dividend - $18,000 preferred stock distribution = $12,000 common stock distribution.

Which of the following statements are true?

Preferred stock dividends in arrears must be paid before dividends can be distributed to common stockholders. If a company skips a dividend on noncumulative preferred stock, the dividend is lost forever.

Which of the following statements are true?

S Corporations are taxed as proprietorships or partnerships. Limited liability companies (LLCs) offer many of the benefits of corporate ownership, yet are, in general, taxed as partnerships.

Which of the following statements are true?

Trading on a stock exchange is limited to the stockbrokers who are members of the exchange. The stock of closely held companies is not sold on major stock exchanges.

The maximum number of shares of stock corporations are legally permitted to issue is the ______ number of shares.

authorized

Preferred stock ______.

dividends are paid before dividends are distributed to common stockholders has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to common stockholders

Declaring a cash dividend ______.

increases liabilities and decreases stockholders' equity

A chief advantage of the corporate form of business is ______.

limited liability

The par value represents the ______.

maximum liability of the investors minimum amount of assets that must be retained in the company as protection for creditors

Cumulative dividends ______.

may also be called dividends in arrears are dividends that accumulate for future payment when a company fails to pay a periodic dividend

When a corporation buys treasury stock, the ______.

number of shares of stock outstanding decreases number of shares of stock authorized is not affected

In predicting the declaration of cash dividend payments a stockholder can examine ______.

the cash account to assess sufficiency for dividend declarations retained earnings to assess sufficiency for dividend declarations

A company repurchased 2,000 shares of its $10 par value stock for $15 per share. Under the most common method of accounting for treasury stock, ______.

the entire $30,000 will be recognized in Treasury Stock

Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. As a result of the stock issue, ______.

the income statement was not affected cash flow from financing activities increased by $240,000 total assets increased by $240,000

Which of the following statements are true?

Many states allow corporations to issue no-par stock. To minimize the amount of assets that owners must maintain in the business, many corporations issue stock with very low par values.

Base Line Incorporated is authorized to issue 50,000 shares of $15 stated value preferred stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Immediately after the issue, Base Line's balance sheet showed ______ of paid-in-capital in excess of stated value.

90,000

Which of the following statements are true?

The requirements for establishing a corporation vary from state to state. A proprietorship is the simplest form of business organization to organize and operate.