chapter 11 smart book

Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $15,000 dividend, the payments to preferred shareholders will total _________.

$2,500

Identify the disadvantages of the corporate form of business

-Corporate taxation -Government regulation

Identify the advantages of the corporate form of business. (Check all that apply.)

-Ease of capital accumulation -Limited liability of stockholders -Continuous life

Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.)

Debit to Cash for $200. Credit to Common Stock, $1 par for $200.

ohn Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts? (Check all that apply.)

Reason: Common Stock and Paid-in Capital in Excess of Par Value are credited.

Stockholders have to right to (blank) at stockholders'.

Vote

The board of directors authorizes a cash (blank) distribution of cash to its investors.

dividend

A charter application usually must be signed by the prospective stockholders called incorporaters or

promoters

A stock __________ is the distribution of additional shares to stockholders according to their percent ownership. When this occurs, the corporation "calls in" its outstanding shares and issues more than one new share in exchange for each old share.

split

The board of directors of Visor, Inc. authorize a _________, a distribution of additional shares of the corporation's own stock, to existing shareholders.

stock dividend

True or false: Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.

true

Identify which of the following is not generally a right of common stockholders.

Manager operations

Which of the following is not a reason that a corporation would issue preferred stock?

To obtain a tax advantage over corporations with no preferred stock

A ___________ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held.

corporation

Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a (debit/credit)

credit, 500

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) _______ to Common Stock for ______.

credit; $500

Corporations can be separated into two types. A (blank) held corporation does not offer its stock for public sale and usually has few stockholders. A (blank) held corporation offers its stock for public sale and can have thousands of stockholders.

privately, publicly

authorized

stock is the number of shares that a corporation's charter allows it to sell. The number of these shares usually exceeds the number of shares issued (and outstanding), often by a large amount.

Two of the biggest disadvantages of the corporate form of business are government regulation and corporate

taxes

A corporation is created by obtaining a charter from:

the state government