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Exam 13: Accounting for Corporations

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Question 71

Multiple Choice

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Stated value of no-par stock is:

A) Another name for redemption value.
B) An amount assigned to par value stock by the state of incorporation.
C) The market value of the stock on the date of issuance.
D) The difference between the par value of stock and the amount below or above par value paid-in by the stockholder.
E) An amount assigned to no-par stock by the corporation's board of directors.

F) D) and E)
G) None of the above

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Question 72

Multiple Choice

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Which of the following is true of a stock dividend?

A) It is a liability on the balance sheet.
B) The decision to declare a stock dividend resides with the shareholders.
C) Transfers a portion of equity from retained earnings to a cash reserve account.
D) Does not affect total equity,but transfer amounts between the components of equity.
E) Reduces a corporation's assets and stockholders' equity.

F) All of the above
G) B) and E)

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Question 73

True/False

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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.

A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.

Minimum legal capital requirements are intended to protect creditors.

Stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because stock is easily transferred.

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:

The date the directors vote to declare and pay a dividend is called the:

Cumulative preferred stock has a right to be paid both current and prior periods' unpaid dividends before any dividend is paid to common shareholders.

A company is authorized to issue 750,000 shares of $2 par value common stock.Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:

A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000.The entry to record this transaction would include:

West Company declared a $0.50 per share cash dividend.The company has 190,000 shares issued,and 10,000 shares in treasury stock.The journal entry to record the dividend declaration is:

Treasury stock is classified as:

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

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

The statement of changes in stockholders' equity:

Halverstein Company's outstanding stock consists of 7,000 shares of cumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value.During the first three years of operation,the corporation declared and paid the following total cash dividends. The amount of dividends paid to preferred and common shareholders in 2016 is:

The stockholders' equity section of a corporation's balance sheet follows: (1)Assuming that the preferred stock is not callable and no dividends are in arrears,compute the book values per preferred share and per common share. (2)Assuming that the preferred stock has a call price of $30 per share and one year of cumulative preferred dividends is in arrears,compute the book values per preferred share and per common share.

A class of stock that can usually be issued at any price without creating a minimum legal capital deficiency is called:

Stock that has been issued and is held by stockholders is ___________________ stock.