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Exam 13: Accounting for Corporations

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Question 1

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The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a:

A) Preemptive right.
B) Proxy right.
C) Right to call.
D) Financial leverage.
E) Voting right.

F) A) and B)
G) A) and C)

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Question 2

True/False

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A reverse stock split reduces the market value per share and the par value per share of stock.

A) True
B) False

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Question 3

Multiple Choice

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A liquidating dividend is:

Paid-in capital is the total amount of cash and other assets the corporation receives from its stockholders in exchange for its stock.

_______________________ are responsible for and have final authority for managing a corporation's activities.

A company had the following stockholders' equity on January 1: On January 10, the company declared a 40% stock dividend to holders of record on January 25, to be distributed January 31. The market value of the stock on January 10 prior to the dividend was $20 per share. What is the book value per common share on February 1?

Retained earnings generally consist of a company's cumulative net income less any net losses and dividends declared since its inception.

Explain stock options and their effect on the company.

A corporation had stockholders' equity on January 1 as follows: Common Stock, $10 par value, 1,500,000 shares authorized, 600,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $2,500,000. Prepare journal entries to record the following transactions:

The price-earnings (PE) ratio is calculated by dividing ___________________________ by ______________________________.

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of paid-in capital in excess of par is:

A company's board of directors votes to declare a cash dividend of $.75 per share. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

The total amount of cash and other assets the corporation receives from its stockholders in exchange for common stock is called ________________________.

A corporation received its charter and began business this year. The company is authorized to issue 50,000 shares of $100 par, 10%, noncumulative, nonparticipating preferred stock, and 500,000 shares of no-par common stock. The following selected transactions occurred during this year: Prepare journal entries to record these transactions.

A corporation has 200,000 shares of $10 par value common stock outstanding. The following selected transactions related to the company's stock took place during the current year: Prepare the journal entries to record these transactions.

The Discount on Common Stock account reflects:

A corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is:

A company had a beginning balance in retained earnings of $43,000. It had net income of $6,000 and paid out cash dividends of $5,625 in the current period. The ending balance in retained earnings equals:

Explain the preparation of journal entries to record the issuance of par value, stated value, and no-par value common stock.

On July 31, a company declared a cash dividend of $0.25 per common share to the shareholders of record on August 15. The cash dividend will be paid on August 25. This company has 500,000 shares authorized and 100,000 shares outstanding. Prepare the journal entries required on July 31, August 15 and August 25.