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Exam 13: Accounting for Corporations

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Question 71

True/False

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If a company resells treasury stock below the acquisition cost, a loss from the sale of treasury stock is recorded.

A) True
B) False

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Question 72

Multiple Choice

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A corporation with $10 par common stock issues a large stock dividend. The capitalization of retained earnings is equal to:

A) The par value of the shares to be distributed.
B) There is no capitalization of retained earnings in the case of a large stock dividend.
C) The market value of the shares outstanding.
D) The market value of the shares to be distributed.
E) The par value of the shares outstanding.

F) D) and E)
G) A) and D)

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Question 73

Multiple Choice

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The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:

Dividend yield shows the annual amount of cash dividends distributed to common shares relative to the stock's market price.

A premium on common stock:

Companies report prior period adjustments, net of any income tax effects in the:

All of the following statements regarding stock dividends are true except:

Dividing stockholders' equity applicable to common shares by the number of common shares outstanding yields the book value per common share.

Shareholders in a corporation have the power to bind the corporation to contracts.

A corporation issued 100 shares of its $5 par value common stock in payment of a $1,800 charge from its accountant for assistance in filing its charter with the state. The entry to record this transaction will include:

Rhoads Corporation is authorized to issue 250,000 shares of $50 par, 10%, noncumulative, nonparticipating preferred stock and 5,000,000 shares of no-par common stock. Prepare journal entries to record the following selected transactions that occurred during this year: $\begin{array} { lll } \text {feb }&1& \text { Issued 10,000 shares of common stock for \$ 30 cash per share.} \\&15& \text {Exchanged 2,000 shares of preferred stock for }\\&& \text {quipment and merchandise inventory with }\\&& \text {market values of \( \$ 80,000 \) and \( \$ 30,000 \), }\\&& \text {respectively. }\\\end{array}$

The total number of shares outstanding is the authorized stock.

Retained earnings are part of the stockholders' claims on the company's net assets.

Torino Company has 10,000 shares of $5 par value, 4% cumulative and nonparticipating preferred stock and 100,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $1,000 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

Growth stocks generally pay large dividends on a regular basis.

A company issued 70 shares of $30 par value preferred stock for $4,000 cash. The journal entry to record the issuance is:

A stock dividend decreases the market price of the company's stock.

Changes in accounting estimates are accounted for in current and future periods.

What are the rights generally granted to common stockholders?

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as: