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Exam 11: Proprietorships, Partnerships, and Corporations

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Question 21

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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. With regards to the statement of 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.

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The cash contribution by the ...

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Question 22

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A net loss occurs when

A) expenses are greater than revenues.
B) liabilities are greater than assets.
C) cash inflow is less than cash outflow.
D) the ending cash balance is lower than the beginning cash balance.

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

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Question 23

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The book value of a share of stock is equal to the market or selling price of the stock.

The Bristol-Fuller partnership was formed on January 1, Year 1, when Bristol and Fuller invested $40,000 and $30,000 cash in the partnership, respectively. During Year 1, the partnership earned $75,000 in cash revenues and paid $52,000 in cash expenses. Bristol withdrew $5,000 cash from the business during the year, and Fuller withdrew $4,000. The partnership agreement specified that net income should be allocated equally to the partners' capital accounts. Required: Indicate how each of the transactions and events for the Bristol partnership affects the financial statements model, below. Indicate dollar amounts of increases and decreases. With regards to the statement of 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.

What is the expected impact of a 2-for-1 stock split?

Vortex Corp. has 250,000 shares of common stock authorized. The company issued 85,000 shares and reacquired 9,000 of those shares as treasury stock. The board of directors subsequently declared a cash dividend of $6 per share. Required: What is the total amount of dividends that were declared?

Gilligan Corporation was established on February 15, Year 1. Gilligan is authorized to issue 500,000 shares of $6.00 par value common stock. As of December 31, Year 3, Gilligan's stockholders' equity accounts report the following balances: At the end of Year 3, Gilligan decides to issue a 5% stock dividend. At the time of issue, the market price of the stock was $22 per share.What is the number of shares outstanding after the stock dividend is issued?

The earnings of sole proprietorships are taxable to the owners rather than the company itself.

Helena Corporation declared a 2-for-1 stock split on 8,000 shares of $6 par value common stock. If the market price of the stock had been $25 a share before the split, the par value, number of shares, and approximate market value after the split would be:

Which type of stock is issued by all corporations?

Weller Corporation issued 10,000 shares of no-par common stock for $25 per share. For this transaction, Common Stock should be increased by $250,000.

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

Indicate how each event affects thefinancial statements. 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.You do not need to enter dollar amounts On January 1, Year 1, Premier Corporation began operations by issuing 10,000 shares of no-par stock for $22 per share.

Chisolm Corporation issued 10,000 shares of $5 par common stock for $22 per share. As a result of this transaction, Chisolm's legal capital increased by $50,000.

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

Which of the following entities would have a "Paid-in Capital in Excess" account in the equity section of the balance sheet?

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

An advantage of the corporate form of business organization is that corporations are free from double taxation.

The board of directors of Chandler Company declared a cash dividend. Which of the following choices accurately reflects how this event would affect the company's financial statements?

An appropriation of retained earnings restricts the amount of dividends that a corporation can declare in the future.