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Exam 13: Accounting for Corporations

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Question 71

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Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. $\begin{array}{ll}&\text { Dividend Declared }\\\ \text { year 1 } & \$ 2,000 \\\text { year 2 } & \$ 6,000 \\\text { year 3 } & \$ 32,000\end{array}$ - The total amount of dividends paid to preferred and common shareholders over the three-year period is:

A) $10,000 preferred; $30,000 common.
B) $12,000 preferred; $28,000 common.
C) $5,000 preferred; $35,000 common.
D) $15,000 preferred; $25,000 common.
E) $11,000 preferred; $29,000 common.

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

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Question 72

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A large stock dividend only occurs when a distribution of more than 50% of previously outstanding shares is issued.

A) True
B) False

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Question 73

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

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

A company issued 60 shares of $100 par value common stock for $7,000 cash. The total amount of paid-in capital in excess of par is:

Stock not assigned a value per share by the corporate charter, allowing it to be issued at any price without the possibility of a minimum legal capital deficiency, is called___________ .

Retained earnings generally consist of a company's cumulative net income less any net losses and dividends declared since its inception.

A stock split is the distribution of additional shares of stock to stockholders according to their percent of ownership.

Explain how to compute dividend yield and discuss how it is used in analysis of a company's financial condition.

On September 20, Fletcher Corporation issued 25,000 shares of no-par common stock for equipment having a market value of $85,000. Prepare the general journal entry to record this transaction.

The price-earnings ratio is computed by dividing earnings per share by the market price per share.

If a corporation receives assets other than cash in exchange for stock, it records the assets received at their market value as of the date of the transaction.

In many states, the minimum amount that stockholders must contribute to the corporation, and which is intended to protect the creditors of the corporation, is called the:

A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share. The entry to record this transaction would be:

On July 1, a corporation issued 15,000 shares of no-par common stock with a stated value of $3 per share in exchange for a tract of land having a market value of $215,000. Prepare the general journal entry to record this transaction.

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

The stockholders' equity section of a corporation's balance sheet follows: (1) Assuming that no dividends are in arrears, compute the book values per preferred share and per common share. (2) Assuming that one year of cumulative preferred dividends is in arrears, compute the book values per preferred share and per common share.

Djarleen Company has 10,000 shares of $10 par preferred stock, which were issued at par. It also has 250,000 shares of common stock outstanding, and its total stockholders' equity equals $4,000,000. The book value per common share is:

Small stock dividends are recorded at par or stated value.

The board of directors of a corporation: