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Exam 11: Proprietorships,partnerships,and Corporations

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Question 21

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A high price-earnings ratio generally means that investors are optimistic about a company's future growth.

A) True
B) False

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Question 22

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Weller Corporation issued 10,000 shares of no-par common stock for $25 per share.For this transaction,Common Stock should be credited (increased)for $250,000.

A) True
B) False

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Question 23

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On December 15,2016,the Binghampton Corporation established a retained earnings appropriation of $20,000 for future expansion.The balance of the retained earnings account prior to the transaction was $60,000.At December 31,2016,the Corporation had 2,000 shares of $10 par common stock (issued at par)outstanding.The corporate charter indicates 20,000 shares of common stock are authorized and there is no treasury stock. Required: a)Indicate the effect of the appropriation on the financial statements. b)Record the appropriation in general journal form. c)Prepare the Stockholder's Equity section of the Binghampton Corporation's Balance sheet of December 31,2016.

For 2016,the Sacramento Corporation had beginning and ending Retained Earnings balances of $208,054 and $231,012 respectively.Also during 2016,the corporation declared and paid cash dividends of $29,000 and issued stock dividends valued at $16,000.Total expenses were $32,916.Based on this information,what was the amount of total revenue for 2016?

Which of the following statements best describes the term "par value?"

Which of the following statements about Treasury Stock is correct?

A corporation must record a liability for cash dividends on the date of record.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. -Taylor Bennett began his sole proprietorship on February 28,2016 by contributing $25,000 of his own money to the business.Indicate the effects of this transaction on the financial statements.

Which of the following is not a reason why a corporation may choose to not pay dividends?

In a closely held corporation,exchanges of stock are limited to transactions between individuals.

Indicate whether each of the following statements is true or false. _____ a)Double taxation refers to the fact that both a partnership and its partners must pay income tax on the earnings of the partnership. _____ b)A sole proprietorship is an accounting entity separate from its owner. _____ c)Limited liability is a benefit to both corporations and partnerships,but not to sole proprietorships. _____ d)Unlike a partnership,a corporation is not terminated when a major stockholder withdraws his or her investment. _____ e)Sole proprietorships are,generally,subject to fewer governmental regulations than corporations.

Explain how the equity section of a balance sheet differs among sole proprietorships,partnerships and corporations.

A sole proprietorship was formed on January 1,2016,when it received $90,000 cash from Kaitlyn Conrad,the owner.During 2016,the business earned $138,000 in cash revenues and paid $102,400 in cash expenses.Conrad withdrew $16,000 in cash during the year. Required: Prepare an income statement,capital statement,balance sheet,and statement of cash flows for the 2016 fiscal year.

Indicate whether each of the following items is true or false. _____ a)Many successful corporations do not pay dividends to their stockholders. _____ b)Careful study of the financial statements will give investors the ability to predict future movements in the market price of a corporation's stock. _____ c)The price-earnings (P/E)ratio is computed by dividing the earnings per share by the market price per share. _____ d)As a general rule,the higher the P/E ratio,the greater is the optimism for future growth of the corporation. _____ e)The number of shares to purchase in order to attain "significant influence" of a corporation can readily be determined from the financial statements.

What effect will the declaration and distribution of a stock dividend have on net income and cash flows?

On what date do dividends become a legal liability of a corporation?

Chisolm Corporation issued 10,000 shares of $5 par common stock for $22 per share.As a result of this transaction,Chisolm's legal capital increased by $50,000.

The Rubble-Flintstone Company was started on January 1,2016 as a partnership.The initial investments from the two partners were $50,000 from Rubble and $30,000 from Flintstone.During 2016,Rubble-Flintstone Company earned $70,000 in cash revenue,paid $42,000 in cash expenses and the partners withdrew $5,000 each for their personal use.The partnership agreement calls for equal sharing of net income or loss.Using only the above information,prepare an income statement,a capital statement,and a balance sheet for the Rubble-Flintstone Company.

Ben Weaver is planning to invest in one of the following companies based on their average performance over the past five years,summarized below. If Ben is looking for a company that is likely to achieve rapid growth in revenues and profitability,which one should he choose?

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Use only one letter for each element.You do not need to enter amounts. -Fort Worth Co.declared a cash dividend but has not yet paid the money to the shareholders.