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

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Question 61

Multiple Choice

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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

A) Treasury Stock for $8,500
B) Paid-In Capital from Sale of Treasury Stock for $8,500
C) Paid-In Capital in Excess of Par-Common Stock for $2,900
D) Paid-In Capital from Sale of Treasury Stock for $2,900

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

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Question 62

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The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.

A) True
B) False

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Question 63

Multiple Choice

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A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 4% stock dividend on a date when the market price was $12 per share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

The declaration and issuance of a stock dividend do not affect the total amount of a corporation's assets, liabilities, or stockholders' equity.

Match each of the following stockholders' equity concepts to the most appropriate term (a-h) . -The number of shares currently held by stockholders

A reduction of par or stated value of stock results from a

When no-par stock is issued, Common Stock is credited for the selling price of the stock issued.

A company had the following stockholders' equity information available at year-end:​Issued 11,000 shares of $2 par common stock for $12 per share.Issued 5,000 shares of $50 par, 6% preferred stock for $70 per share.Purchased 1,000 shares of previously issued common stock for $15 per share.Reported net income of $200,000.Declared and paid the preferred stock dividend.​Calculate the earnings per share for the current year.

The balance in Retained Earnings should be interpreted as representing surplus cash left over for dividends.

The primary purpose of a stock split is to

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

Nevada Corporation has 30,000 shares of $25 par stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the number of shares outstanding will be

Stockholders' equity

A sale of treasury stock may result in a decrease in paid-in capital. All decreases should be charged to Paid-In Capital from Sale of Treasury Stock.

A corporation has 12,000 shares of $20 par 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.

If the dividend amount of preferred stock, $50 par value, is quoted as 8%, then the dividends per share would be $4.

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

A restriction/appropriation of retained earnings establishes cash assets that are set aside for a specific purpose.

Carmen Company is a corporation that has issued both preferred and common stock. As of January 1, it had 50,000 shares of 2.75%, $100 par, preferred stock outstanding and 250,000 shares of $10 par common stock outstanding. Journalize the following transactions:? (a) On January 31, the board of directors issues a requirement to purchase 5,000 shares of its common stock atmarket price. The shares are purchased at a market price of $22 per share. (b) On March 15, Carmen declares a dividend on preferred stock of $2.75 per share. The date of record isMarch 25 and the date of payment is March 31. (c) On December 1, Carmen declares a cash dividend on common stock of $0.12 per share. The date of record isDecember 15 and the date of payment is December 21. (d) On December 27, the board orders that 2,500 shares of the treasury stock purchased in (a) be sold. The saleprice is $25 per share.

Double taxation is a disadvantage of a corporation because the corporation has to pay income taxes at twice the rate applied to partnerships.