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Exam 11: Corporations: Organization, Stock Transactions, and Dividends

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Question 51

Multiple Choice

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Which of the following is not classified as paid-in capital on the balance sheet?

A) common stock
B) common stock distributable
C) donated capital
D) treasury stock

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

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Question 52

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Characteristics of a corporation include

A) shareholders who are mutual agents
B) direct management by the shareholders (owners)
C) its inability to own property
D) shareholders who have limited liability

E) None of the above
F) B) and C)

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Question 53

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Sabas Company has 20,000 shares of $100 par, 1% 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 each year.

The stock dividends distributable account is listed in the current liability section of the balance sheet.

One of the main disadvantages of the corporate form is the

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.

Which of the following is not true of a corporation?

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?

Organizational expenses are classified as intangible assets on the balance sheet.

The excess of sales price of treasury stock over its cost should be credited to

Under the Internal Revenue Code, corporations are required to pay federal income taxes.

The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.

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:

Which of the following is not a prerequisite to paying a cash dividend?

Par value

When a stock dividend is declared, which of the following accounts is credited?

Retained earnings

On April 10, Maranda Corporation issued for cash 11,000 shares of no-par common stock at $25. On May 5, Maranda issued at par 1,000 shares of 4%, $50 par preferred stock for cash. On May 25, Maranda issued for cash 15,000 shares of 4%, $50 par preferred stock at $55. Journalize the entries to record the April 10, May 5, and May 25 transactions.

When the board of director's declares a cash or stock dividend, this action decreases retained earnings.

The retained earnings statement may be combined with the income statement.