Q&A Hero

Q: Twenty percent of all businesses in the United States are corporations, and they account for 80% of the total business dollars generated. a. True b. False

Q: Retained Earnings represents past net income less past dividends; therefore, any balance in this account would be listed on the income statement. a. True b. False

Q: The initial owners of stock of a newly formed corporation are called directors. a. True b. False

Q: 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. True b. False

Q: Big Bluestem Inc. reported the following results for the year ending April 30:Retained earnings, May 1 $3,750,000Net income 720,000Cash dividends declared 80,000Stock dividends declared 220,000Prepare a retained earnings statement for the fiscal year ended April 30.

Q: On April 1, 10,000 shares of $5 par common stock were issued at $22, and on April 7, 5,000 shares of $50 par preferred stock were issued at $104. Journalize the entries for April 1 and 7.

Q: On March 4 of the current year, Barefoot Bay, Inc. reacquired 5,000 shares of its common stock at $89 per share. On August 7, Barefoot Bay sold 3,500 of the reacquired shares at $100 per share. The remaining 1,500 shares were sold at $88 per share on November 29.a. Journalize the transactions of March 4, August 7, and November 29.b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?c. Why might Barefoot Bay, Inc. have purchased the treasury stock?

Q: Marcos Company, which had 35,000 shares of common stock outstanding, declared a 4-for-1 stock split.a. What will be the number of shares outstanding after the split?b. If the common stock had a market price of $280 per share before the stock split, what would be an approximate market price per share after the split?

Q: On February 13, Epperson Company issued for cash 75,000 shares of no-par common stock (with a stated value of $125) at $140. On September 9, Epperson issued at par 15,000 shares of 1%, $60 par preferred stock at par for cash. On November 23, Epperson issued for cash 8,000 shares of 1%, $60 par preferred stock at $70.​Journalize the entries for the February 13, September 9, and November 23 transactions.

Q: Using the following information, prepare the Stockholders’ Equity section of the balance sheet using Method 1 (separating sources of additional paid-in capital). Seventy thousand shares of common stock are authorized and 7,000 shares have been reacquired.Common Stock, $75 par$4,725,000Paid-In Capital in Excess of Par679,000Paid-In Capital from Sale of Treasury Stock25,200Retained Earnings2,032,800Treasury Stock600,000

Q: Journalize the following selected transactions completed during the current fiscal year:Jan. 3The board of directors declared a stock split that reduced the par of common shares from $100 to $20. This action increased the number of outstanding shares to 400,000.​​ 22Declared a dividend of $1.75 per share on the outstanding shares of common stock.​​Feb. 8Paid the dividend declared on January 22. Sept. 1Declared a 5% stock dividend on the common stock outstanding (the fair market value of the stock to be issued is $30.)​​Oct. 1Issued the certificates for the common stock dividend declared on September 1.

Q: Journalize the following selected transactions completed during the current fiscal year:Feb. 1The board of directors declared a stock split that reduced the par of common shares from $100 to $20. This action increased the number of outstanding shares to 500,000.​​ 11Purchased 25,000 shares of the company's own stock at $44, recording the treasury stock at cost.​​May 1Declared a dividend of $2.50 per share on the outstanding shares of common stock.​​ 15Paid the dividend declared on May 1. Oct. 19Declared a 2% stock dividend on the common stock outstanding (the fair market value of the stock to be issued is $55).​​Nov. 12Issued the certificates for the common stock dividend declared on October 19.

Q: 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 at market 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 is March 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 is December 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 sale price is $25 per share.

Q: A company has 10,000 shares of $10 par common stock outstanding. Journalize the following transactions:a. Purchased 1,500 shares of treasury stock at $16. The treasury stock is accounted for by the cost method. There were no previous purchases of treasury shares.b. Sold 1,000 shares of treasury stock at $19.c. Purchased equipment for $80,000, paying $25,000 in cash and issuing 4,000 shares of common stock.d. Sold 500 shares of treasury stock at $14.

Q: Journalize the following transactions:a. Issued 1,000 shares of $10 par common stock at $59 for cash.b. Issued 1,400 shares of $10 par common stock in exchange for equipment with a fair market price of $60,000.c. Purchased 100 shares of treasury stock at $32.d. Sold the 100 shares of treasury stock purchased in (c) at $42.

Q: Macy Company has issued and outstanding 10,000 shares of 2% cumulative preferred stock of $50 par and 25,000 shares of $75 par common stock. The following amounts were distributed as dividends:Year 1$30,000Year 26,000Year 380,000​Determine the dividend per share for preferred and common stock for each year.

Q: 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 for the April 10, May 5, and May 25 transactions.

Q: Firefly, Inc., reported the following results for the year ending July 31:Retained earnings, August 1$875,000Net income450,000Cash dividends declared140,000Stock dividends declared60,000​Prepare a retained earnings statement for the fiscal year ended July 31.

Q: The following transaction took place for XYZ Corporation: Nov. 12Declared a total cash dividend of $45,000 for stockholders of record November 20 payable on December 1. ​a. Journalize the entries required by these events.b. Briefly describe the significance of November 20.

Q: At December 31, Idaho Company had the following ending account balances:Retained Earnings$250,000Preferred Stock ($100 par, 7% cumulative, 10,000 authorized, 5,000 issued and outstanding)500,000Treasury Stock40,000Paid-In Capital in Excess of Par—Common Stock625,000Paid-In Capital in Excess of Par—Preferred Stock50,000Common Stock ($5 par value, 500,000 shares authorized, 105,000 issued)525,000Prepare the Stockholders' Equity section of the balance sheet using Method 2 (showing combined additional paid-in capital).

Q: Wonder Sales is authorized to issue 100,000 shares of 2%, $100 par preferred stock and 1,000,000 shares of $10 par common stock. Journalize the following transactions:a. On January 2, Wonder Sales issues 5,000 shares of preferred stock for $110 per share and 65,000 shares of common stock at $10 per share.b. On January 25, Wonder Sales issues 250 shares of preferred stock to Morton Law Firm for settlement of a $36,000 invoice for incorporation services.c. On January 31, Wonder Sales issues 500 shares of common stock to Setup Inc. for fixtures that have a fair market value of $8,500.

Q: Using the following accounts and balances, prepare the Stockholders’ Equity section of the balance sheet using Method 1 (separating sources of additional paid-in capital). Fifty thousand shares of common stock are authorized, and 5,000 shares have been reacquired.Common Stock, $50 par$1,250,000Paid-In Capital in Excess of Par800,000Paid-In Capital from Sale of Treasury Stock42,000Retained Earnings4,350,000Treasury Stock155,000

Q: On June 5, Belen Corporation reacquired 3,300 shares of its own common stock at $45 per share. On July 15, Belen sold 2,000 of the reacquired shares at $48 per share. On August 30, Belen sold the remaining shares at $42 per share.​Journalize the transactions of June 5, July 15, and August 30.

Q: 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.​Determine the earnings per share for the current year.

Q: A corporation was organized on January 1 of the current year with an authorization of 20,000 shares of 4%, $12 par preferred stock and 100,000 shares of $3 par common stock.The following selected transactions were completed during the first year of operations:Jan. 3Issued 15,000 shares of common stock at $23 per share for cash. 31Issued 200 shares of common stock to an attorney in payment of legal fees for organizing the corporation. The value of the stock at the time of payment was $25 per share. Feb. 24Issued 20,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $65,000, $120,000, and $45,000, respectively. Mar. 15Issued 2,000 shares of preferred stock at $56 for cash.​Journalize the transactions.

Q: On February 1 of the current year, Motor, Inc., issued 700 shares of $2 par common stock to an attorney in return for preparing and filing the articles of incorporation. The value of the services is $9,600. Journalize this transaction.

Q: On May 1, 10,000 shares of $10 par common stock were issued at $30, and on May 7, 5,000 shares of $50 par preferred stock were issued at $111. Journalize the entries for May 1 and 7.

Q: On April 10, a company acquired land in exchange for 1,000 shares of $20 par common stock with a current market price of $73. Journalize this transaction.

Q: On January 1, Year 1, a company had the following transactions:Issued 10,000 shares of $2 par common stock for $12 per share.Issued 3,000 shares of $50 par, 6% cumulative preferred stock for $70 per share.Purchased 1,000 shares of previously issued common stock for $15 per share.The company had the following dividend information available:Year 1No dividend paidYear 2Paid $2,000 total dividendsYear 3Paid $20,000 total dividendsYear 4Paid $25,000 total dividendsUsing the following format, fill in the correct values for each year: Year 1 Year 2 Year 3 Year 4Common stock dividend______ ______ ______ ______Preferred stock dividend______ ______ ______ ______Dividends in arrears______ ______ ______ ______

Q: Torre Company has the following stockholders' equity account balances on December 31: Common Stock, $5 par (60,000 shares issued) $300,000 Paid-In Capital in Excess of Par—Common Stock 600,000 Preferred Stock, $100 par (5,000 shares issued) 500,000 Paid-In Capital in Excess of Par—Preferred Stock 100,000 Retained Earnings 200,000 Treasury Stock (cost, $12 per share) 60,000a. How many shares of treasury stock are owned?b. What was the average market price per share at which common stock was issued?c. What was the average market price per share at which preferred stock was issued?d. What is the total value of the paid-in capital portion of stockholders' equity?e. What is the total value of stockholders' equity?f. How many shares of common stock are outstanding?g. If net income for the year was $75,000 and a preferred stock dividend of $20,000 was paid, what was the beginning value of retained earnings? How much is earnings per share for the year?

Q: On February 1, Marine Company reacquired 7,500 shares of its common stock at $30 per share. On March 15, Marine sold 4,500 of the reacquired shares at $34 per share. On June 2, Marine sold the remaining shares at $28 per share.​Journalize the transactions of February 1, March 15, and June 2.

Q: Vincent Corporation has 100,000 shares of $100 par common stock outstanding. On June 30, Vincent Corporation declared a 5% stock dividend to be issued on July 30 to stockholders of record July 15. The market price of the stock was $132 a share on June 30. Journalize the entries required on June 30, July 15, and July 30.

Q: Journalize the following transactions for Maine Corp.:a. Issued 2,000 shares of $10 par common stock at $72 for cash.b. Issued 2,500 shares of common stock in exchange for land with a fair market price of $130,000.c. Purchased 400 shares of treasury stock at $70.d. Sold the 400 shares of treasury stock purchased in (c) at $76.

Q: Solar Company has 600,000 shares of $75 par common stock outstanding. On February 13, Solar declared a 3% stock dividend to be issued on April 30 to stockholders of record on March 14. The market price of the stock was $90 per share on February 13.​Journalize the entries required on February 13, March 14, and April 30.

Q: Journalize the following selected transactions completed during the current fiscal year: Mar. 24The board of directors of New Town, Inc., declared a stock split that reduced the par of common shares from $100 to $20. This action increased the number of outstanding shares to 500,000.​​ 26Declared a dividend of $1.75 per share on the outstanding shares of common stock.​​Apr. 5Paid the dividend declared on March 26.​​Nov. 1Declared a 5% stock dividend on the common stock outstanding (the fair market value of the stock to be issued is $25).​​Dec. 1Issued the certificates for the common stock dividend declared on November 1.​

Q: The following account balances appeared on the balance sheet of Osgood Industries at the beginning of the period:Common Stock (300,000 shares authorized, $100 par)$10,000,000Paid-In Capital in Excess of Par—Common Stock2,000,000Retained Earnings45,000,000During the period, the board of directors declared a 2% stock dividend when the market price of the stock was $135 per share.a.Journalize the entries for the following: (1)Declaration of the dividend, capitalizing an amount equal to market value (2)Issuance of the stock certificatesb.Determine the following amounts before the stock dividend was declared: (1)Total paid-in capital (2)Total retained earnings (3)Total stockholders’ equityc.Determine the following amounts after the stock dividend was declared and closing entries were made at the end of the year: (1)Total paid-in capital (2)Total retained earnings (3)Total stockholders’ equity

Q: Indicate whether the following actions would (+) increase, (–) decrease, or (0) not affect a company's total assets, liabilities, and stockholders' equity. Stockholders' AssetsLiabilitiesEquitya.Declaring a cash dividend_____________________b.Paying the cash dividend declared in (a)_____________________c.Declaring a stock dividend_____________________d.Issuing stock certificates for the stock dividend declared in (c)_____________________

Q: The dates of importance in connection with a cash dividend of $50,000 on a corporation’s common stock are January 15, February 15, and March 15. Journalize the entries required on each date.

Q: On April 2 a corporation purchased for cash 5,000 shares of its own $10 par common stock at $16 per share. It sold 3,000 of the treasury shares at $19 per share on June 10. The remaining 2,000 shares were sold on November 10 for $12 per share.​a. Journalize the entries for the purchase (treasury stock is recorded at cost).b. Journalize the entries for the sale of the stock.

Q: A company had stock outstanding as follows during each of its first three years of operations: 2,500 shares of 10%, $100 par, cumulative preferred stock and 50,000 shares of $10 par common stock. The amounts distributed as dividends follow. Determine the total and per-share dividends for each class of stock for each year by completing the schedule. ​ Preferred Common YearDividendsTotal Per Share Total Per Share1$10,000_________ _________ _________ _________2 25,000_________ _________ _________ _________3 60,000_________ _________ _________ _________

Q: A corporation, which had 18,000 shares of common stock outstanding, declared a 3-for-1 stock split.a. What will be the number of shares outstanding after the split?b. If the common stock had a market price of $240 per share before the stock split, what would be an approximate market price per share after the split?c. Journalize the entry for the stock split.

Q: Selected transactions completed by Breezeway Construction during the current fiscal year are as follows:Feb. 3Split the common stock 2-for-1 and reduced the par from $40 to $20 per share. After the split, there were 250,000 common shares outstanding. Apr. 10Declared semiannual dividends of $1.50 on 18,000 shares of preferred stock and $0.08 on the common stock to stockholders of record on May 10, payable on June 9. June 9Paid the cash dividends. Oct. 10Declared semiannual dividends of $1.50 on the preferred stock and $0.04 on the common stock (before the stock dividend). In addition, a 2% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $36. Dec. 9Paid the cash dividends and issued the certificates for the common stock dividend.​Journalize these transactions.

Q: On May 10, a company issued for cash 1,500 shares of no-par common stock (with a stated value of $2) at $14, and on May 15, it issued for cash 2,000 shares of $15 par preferred stock at $58.​Journalize the entries for May 10 and 15, assuming that the common stock is to be credited with the stated value.

Q: Match each of the following equations to the appropriate result (a–h).a. Treasury Stockb. Retained Earnings (ending)c. Preferred Stockd. Excess of Issue Price over Par (preferred)e. Common Stockf. Total Paid-In Capitalg. Excess of Issue Price over Par (common)h. Total Stockholders' EquityNumber of Reacquired Shares of Common Stock × Purchase Price of Common Stock

Q: Match each of the following stockholders' equity concepts to the appropriate term (a–h).a. Articles of incorporationb. Limited liabilityc. Bylawsd. Corporatione. Public corporationf. Board of directorsg. Private corporationh. DividendsCorporate income distributed to stockholders

Q: Match each of the following stockholders' equity concepts to the most appropriate term (a–h).a. Authorized sharesb. Issued sharesc. Outstanding sharesd. Par valuee. Common stockf. Preferred stockg. Paid-In Capital in Excess of Parh. Transfer agentA financial institution that records and maintains records of another company's stockholders

Q: Retained earnings a. is the same as contributed capital b. cannot have a debit balance c. changes are summarized in the retained earnings statement d. is equal to cash on hand

Q: Which of the following is not a prerequisite to paying a cash dividend? a. formal action by the board of directors b. market value in excess of par value per share c. sufficient cash d. sufficient retained earnings

Q: Texas Inc. has 10,000 shares of 6%, $125 par value cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31. What is the annual dividend on the preferred stock? a. $60 per share b. $75,000 in total c. $10,000 in total d. $0.75 per share

Q: Which of the following is the appropriate journal entry for the declaration of cash dividends? a. Retained Earnings Cash b. Cash Dividends Payable Cash c. Paid-In Capital Cash Dividends Payable d. Cash Dividends Cash Dividends Payable

Q: Kansas Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. The stock is widely traded and selling for $15 per share. At what amount should the building be recorded by Kansas Company? a. $60,000 b. $180,000 c. $210,000 d. $120,000

Q: The authorized stock of a corporation a. must be recorded in a formal accounting entry b. only reflects the initial capital needs of the company c. is indicated in its bylaws d. is indicated in its charter

Q: Treasury stock that was purchased for $3,000 is sold for $3,500. As a result of these two transactions combined, a. income will be increased by $500 b. stockholders' equity will be increased by $3,500 c. stockholders' equity will be increased by $500 d. stockholders' equity will not change

Q: The term deficit is used to refer to a debit balance in which of the following accounts of a corporation? a. Retained Earnings b. Treasury Stock c. Organizational Expenses d. Common Stock

Q: A disadvantage of the corporate form of business entity is a. mutual agency for stockholders b. unlimited liability for stockholders c. corporations are subject to more governmental regulations d. the ease of transfer of ownership

Q: Which of the following is not true of a corporation? a. It may enter into binding legal contracts in its own name. b. It may sue and be sued. c. The acts of its owners bind the corporation. d. It may buy, own, and sell property.

Q: The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called a. treasury stock b. issued stock c. outstanding stock d. authorized stock

Q: The excess of issue price over par of common stock is termed a(n) a. discount b. income c. deficit d. premium

Q: Which of the following is not a right possessed by common stockholders of a corporation? a. the right to vote in the election of the board of directors b. the right to receive a minimum amount of dividends c. the right to sell their stock to anyone they choose d. the right to share in assets upon liquidation

Q: Which of the following amounts should be disclosed in the Stockholders' Equity section of the balance sheet? a. the number of shares of common stock outstanding b. the number of shares of common stock issued c. the number of shares of common stock authorized d. All of these choices

Q: Oregon, Inc., reported net income of $105,000. During the current year, the company had 5,000 shares of $100 par, 5% preferred stock and 10,000 shares of $5 par common stock outstanding. Oregon's earnings per share is a. $8.00 b. $18.00 c. $5.08 d. $5.00

Q: The ability of a corporation to obtain capital is a. less than the ability of a partnership b. about the same as the ability of a partnership c. restricted because of the limited life of the corporation d. enhanced because of limited liability and ease of share transferability

Q: The price at which a stock can be sold depends on a number of factors. Which of the following is not one of those factors? a. the financial condition, earnings record, and dividend record of the corporation b. investor expectations of the corporation's earning power c. how high the par value is d. general business and economic conditions and prospects

Q: Which of the following is not a characteristic of a corporation? a. The financial loss that a stockholder may suffer from owning stock in a public company is limited. b. Cash dividends paid by a corporation are deductible as expenses by the corporation. c. A corporation can own property in its name. d. Corporations are required to file federal income tax returns.

Q: Alma Corp. issues 1,000 shares of $10 par common stock at $14 per share. When the transaction is journalized, credits are made to a. Common Stock, $14,000 b. Common Stock, $10,000, and Paid-In Capital in Excess of Par—Common Stock, $4,000 c. Common Stock, $4,000, and Paid-In Capital in Excess of Stated Value, $10,000 d. Common Stock, $10,000, and Retained Earnings, $4,000

Q: The par value per share of common stock represents the a. minimum selling price of the stock established by the articles of incorporation b. minimum amount the stockholder will receive when the corporation is liquidated c. dollar amount assigned to each share d. amount of dividend per share to be received each year

Q: Which of the following is not classified as paid-in capital on the balance sheet? a. common stock b. common stock distributable c. excess of issue price over par d. treasury stock

Q: Stockholders' equity a. is usually equal to cash on hand b. includes paid-in capital and liabilities c. includes retained earnings and paid-in capital d. is shown on the income statement

Q: Nebraska Inc. issues 3,000 shares of common stock for $45,000. The stock has a stated value of $10 per share. The journal entry for the stock issuance would include a credit to Common Stock for a. $30,000 b. $45,000 c. $15,000 d. $3,000

Q: Under the corporate form of business organization, a. ownership rights are easily transferred b. a stockholder is personally liable for the debts of the corporation c. stockholders’ acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation d. stockholders wishing to sell their corporate shares must get the approval of other stockholders

Q: On January 1, Vermont Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20 per share. On February 1, Vermont purchased 3,750 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1.The journal entry for the purchase of the treasury shares on February 1 would include a a. credit to Treasury Stock for $90,000 b. debit to Treasury Stock for $90,000 c. debit to a loss account for $112,500 d. credit to a gain account for $112,500

Q: The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to a. decrease total liabilities and stockholders' equity b. increase total expenses and total liabilities c. increase total assets and stockholders' equity d. decrease total assets and stockholders' equity

Q: The excess of sales price of treasury stock over its cost should be credited to a. Treasury Stock Receivable b. Premium on Capital Stock c. Paid-In Capital from Sale of Treasury Stock d. Income from Sale of Treasury Stock

Q: Earnings per share a. is the net income per common share b. must be reported by a public company c. helps compare companies of different sizes d. All of these choices

Q: Those most responsible for the major policy decisions of a corporation are the a. management b. board of directors c. employees d. stockholders

Q: If common stock is issued for an amount greater than par value, the excess should be credited to a. Retained Earnings b. Cash c. Legal Capital d. Paid-In Capital in Excess of Par

Q: Sneed Corporation issues 10,000 shares of $50 par preferred stock for cash at $75 per share. The journal entry for the transaction will consist of a debit to Cash for $750,000 and a credit or credits to a. Preferred Stock for $750,000 b. Preferred Stock for $500,000 and Paid-In Capital in Excess of Par—Preferred Stock for $250,000 c. Preferred Stock for $500,000 and Retained Earnings for $250,000 d. Paid-In Capital from Preferred Stock for $750,000

Q: Treasury stock that had been purchased for $5,600 last month was reissued this month for $8,500. The journal entry for 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

Q: Treasury stock shares are a. shares held by the U.S. Treasury Department b. part of the total outstanding shares but not part of the total issued shares of a corporation c. unissued shares that are held by the treasurer of the corporation d. issued shares that have been reacquired by a corporation

Q: Which of the following is not a reason for a corporation to buy back its own stock? a. resale to employees b. bonus to employees c. support the market price of the stock d. increase the shares outstanding