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Exam 13: Corporations: Organization, Stock Transactions, and Dividends

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Question 1

True/False

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A prior period adjustment should be reported as an adjustment to the retained earnings balance at the beginning of the period in which the adjustment was made.

A) True
B) False

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Question 2

Multiple Choice

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The par value per share of common stock represents

A) the minimum selling price of the stock established by the articles of incorporation.
B) the minimum amount the stockholder will receive when the corporation is liquidated
C) an arbitrary amount established in the articles of incorporation
D) the amount of dividends per share to be received each year

E) None of the above
F) A) and B)

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Question 3

Multiple Choice

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What is the total stockholders' equity based on the following account balances?

A stock split results in a transfer at market value from retained earnings to paid-in capital.

Sabas Company has 40,000 shares of $100 par, 1% preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Determine the dividends per share for preferred and common stock for each year.

The primary purpose of a stock split is to

Those most responsible for the major policy decisions of a corporation are the

Match the value to the appropriate account. For the year ended 2012 ABC had the following transactions: - issued 10,000 shares of $2.00 par value common stock for $12.00 per share - issued 3,000 shares of $50 par value 6% preferred stock for $70 per share - purchased 1000 shares of previously issued common stock for $15.00 per share -reported net income of $200,000 - declared and paid a total dividend of $40,000 Assume that retained earnings had a beginning balance of $75,000.

On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 4,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx. The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a

Retained earnings represents past net incomes less past dividends, therefore any balance in this account would be listed on the income statement.

When Bayou Corporation was formed on January 1, 20xx, the corporate charter provided for 100,000 share of $10 par value common stock. The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 9,000 shares of stock at a price of $23 per share. The entry to record the above transaction would include a

Which of the following is not classified as paid-in capital on the balance sheet?

Samuels, Inc. reported net income for 2011 is $105,000. During 2011 the company had 5,000 shares of $100 par, 5% preferred stock and 20,000 of $5 par common stock outstanding. Samuels' earnings per share for 2011 is

The excess of sales price of treasury stock over its cost should be credited to

The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to

Which of the following statements concerning taxation is accurate?

Treasury stock that had been purchased for $5,600 last month was reissued this month for $8,500. The journal entry to record the reissuance would include a credit to

Under the cost method, when treasury stock is purchased by the corporation, the par value and the price at which the stock was originally issued are important.

Which of the following is not a right possessed by common stockholders of a corporation?

On February 1 of the current year, Motor, Inc. issued 700 shares of $2 par common stock to an attorney in return for preparing and filing the Articles of Incorporation. The value of the services is $9,600. Journalize this transaction.