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

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Question 41

True/False

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Double taxation is a disadvantage of a corporation because the same party has to pay taxes twice on the income.

A) True
B) False

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Question 42

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The amount of capital paid in by the stockholders of the corporation is called legal capital.

A) True
B) False

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Question 43

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Which of the following is not characteristic of a corporation?

The Torre Company has the following balances in stockholders equity on December 31st. Common Stock - $5.00 par, 60,000 issued $300,000 Additional paid in capital - common 600,000 Preferred stock - $100 par, 5,000 issued 500,000 Additional paid in capital - preferred 100,000 Retained earnings 200,000 Treasury stock (cost - $12.00 per share) 60,000 Answer the following questions: 1. How many shares of treasury stock are owned? 2. What was the average market price per share at which common stock was issued? 3. What was the average market price per share at which preferred stock was issued? 4. What is the total value of the Paid in Capital portion of stockholders equity? 5. What is the total value of stockholders equity? 6. How many shares of common stock are outstanding? 7. If net income for the year was $75,000 and a preferred stock dividend of $20,000 was paid, what was the beginning value of retained earnings? How much is earnings per share for the year?

When a corporation completes a 3-for-1 stock split

The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a

If a corporation is liquidated, preferred stockholders are paid before the creditors and before the common stockholders.

Cash dividends become a liability to a corporation on the date of record.

A corporation was organized on January 1 of the current year, with an authorization of 20,000 shares of $4 preferred stock, $12 par, and 100,000 shares of $3 par common stock. The following selected transactions were completed during the first year of operations: Required: Journalize the transactions.

In which section of the financial statements would Paid-In Capital from Sale of Treasury Stock be reported?

A corporation is a separate entity for accounting purposes but for legal purposes.

Characteristics of a corporation include

Journalize the following selected transactions completed during the current fiscal year:

Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Determine the dividends in arrears for preferred stock for the second year.

A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.

Earnings per share

All of the following are normally found in a corporation's stockholders' equity section except

Twenty percent of all businesses in the United States are corporations and they account for 80% of the total business dollars generated.

Sabas Company has 20,000 shares of $100 par, 2% cumulative 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 the third year.

Significant changes in stockholders' equity are reported in