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Exam 8: Proprietorships, Partnerships, and Corporations

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Question 51

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Which of the following entities would report income tax expense on its income statement?

A) A sole proprietorship.
B) A corporation.
C) A partnership.
D) All of these answer choices are correct.

E) A) and D)
F) B) and D)

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Question 52

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What is meant by "double taxation?" Which type of organizational form is more likely to be subject to double taxation?

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Double taxation is when the sa...

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Question 53

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At the end of the accounting period, Houston Company had $12,000 of par value common stock issued, additional paid-in capital in excess of par value − common of $11,000, retained earnings of $12,000, and $4,000 of treasury stock. The total amount of stockholders' equity is:

The term "Retained Earnings" is best explained by which of the following statements?

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Use only one letter for each element. You do not need to enter amounts. Increase = IDecrease = D No Affected = NAWheaton Company reissued 100 shares of treasury stock. The treasury stock had been purchased by Wheaton at $18 per share. The shares were reissued at a price of $20 per share.

Jalisco, Incorporated, had issued and outstanding 250,000 shares of $8 par value common stock at January 1, Year 1 with a retained earnings balance of $750,000. Jalisco issued a 12% stock dividend to its common shareholders. At the time of the dividend the market value of the stock was $17 per share.Required:What is the total dollar amount of the stock dividend? How many shares are outstanding after the stock dividend?

A sole proprietorship was established on January 1, Year 1, when it received $30,000 cash from Connor Howard, the owner. During Year 1, the business earned $80,000 in cash revenues and paid $62,000 in cash expenses. Howard withdrew $9,000 from the business during Year 1. Required:Indicate how each of the transactions and events for the Howard sole proprietorship affects the financial statements model, below. Indicate dollar amounts of increases and decreases. For cash flows, indicate whether each is an operating activity (OA), investing activity (IA), or financing activity (FA). Indicate NA if an element is not affected by a transaction.

When the common stock account is disclosed on the balance sheet, it is reported at:

Lack of ease in transferability of ownership is one of the important disadvantages of the corporate form of business organization.

Gilligan Corporation was established on February 15, Year 1. Gilligan is authorized to issue 400,000 shares of $12 par value common stock. As of December 30, Year 1, Gilligan's stockholders' equity accounts report the following balances: On December 31, Year 1, Gilligan decides to issue a 5% stock dividend. At the time of issue, the market price of the stock was $38 per share.What is the dollar value of the stock dividend issued by Gilligan Corporation?

Which of the following is not normally a preference given to the holders of preferred stock?

In a closely held corporation, exchanges of stock are limited to transactions between individuals.

Which of the following terms designates the maximum number of shares of stock that a corporation may issue?

What is the meaning of "par value" of stock?

A benefit of corporations is that they are free from double taxation.

A corporation is a legal entity created by the authority of a state government, separate and distinct from its owners.

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Use only one letter for each element. You do not need to enter amounts. Increase = IDecrease = D No Affected = NA Miller Company declared and distributed a stock dividend.

Blair Scott started a sole proprietorship by depositing $75,000 cash in a business checking account. During the accounting period the business borrowed $30,000 from a bank, earned $18,000 of net income, and Scott withdrew $12,000 cash from the business. Based on this information, at the end of the accounting period Scott's capital account contained a balance of:

On March 1, Year 1, Gilmore Incorporated declared a cash dividend on its 1,500 outstanding shares of $50 par value, 6% preferred stock. The dividend will be paid on May 1, Year 1 to the stockholders of record as of April 1, Year 1.How will the entry to record the dividend on March 1 affect the financial statements?

When a corporation records a stock dividend, it decreases the retained earnings account for the par value of the stock.