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Exam 11: Stockholders Equity

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Question 31

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Tropical Co.declared a cash dividend of $30,000.The entry includes a(n)

A) decrease to Cash of $30,000.
B) increase to Retained Earnings of $30,000.
C) decrease to Retained Earnings of $30,000.
D) decrease to Cash Dividend Payable of $30,000.

E) B) and D)
F) B) and C)

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Question 32

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When an individual wishes to form a sole proprietorship,he or she does so by

A) filing a petition with the IRS.
B) purchasing stock in the proprietorship.
C) filing corporate paperwork with the state.
D) contributing cash or other assets.

E) A) and B)
F) A) and C)

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Question 33

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Fowler Company opened business as a sole proprietorship on January 1,2017.The owner contributed $525,000 cash on that date.During the year,the company had a net income of $20,000.The company purchased equipment of $120,000 during the year.The owner also withdrew $75,000 to pay for personal expenses during 2017. Required Determine the company's owner's equity at December 31,2017.

Select the best answer from the list below to complete statements that follow. $\begin{array} { l l l } \text { Authorized shares } & \text { treasury stock } & \text { book value per share } \\\text { issued shares } & \text { stock dividend } & \text { par value per share } \\\text { outstanding shares } & \text { additional paid-in-capital } & \text { market value per share } \\\text { stock split } & \text { dividend payout ratio } & \text { retained earnings }\end{array}$ -The selling price of the stock as indicated by the most recent stock transaction is __________.

Which of the following is true regarding the statement of cash flows?

At December 31,2017,North Company and South Company have identical amounts of common stock and retained earnings as follows: Common stock,$10 par,50,000 shares authorized,9,000 issued,9,000 outstanding Retained earnings,$500,000 At December 31,2017,North Company declares and issues a 100% stock dividend,while South Company declares and issues a 2-for-1 stock split. Required Determine for each company the following amounts as of January 1,2018: _______ Number of shares of common stock outstanding _______ Par value per share of the common stock _______ Total amount reported in Common Stock account _______ Retained earnings

Stock dividends affect the par value per share of the stock.

A company may prepare a statement of retained earnings instead of a statement of stockholders' equity if the only changes in the stockholders' equity accounts that occurred during the year are earnings and dividends.

Contrast stock dividends and stock splits.

Dividends in Arrears

Poole Company began business on January 1,2017.The corporate charter authorized issuance of 5,000 shares of $1 par value common stock,and 4,000 shares of $8 par value,6% cumulative preferred stock.None of the preferred shares were issued.On July 1,Poole issued 1,000 shares of common stock in exchange for two years rent on a retail location.The cash rental price is $2,400 per month,and the rental period begins on July 1.The correct entry to record the July 1 transaction will

Stockholders' equity is composed of three parts: contributed capital,earnings retained in the business,and dividends paid.

Under IFRS,an item such as a convertible bond must be separated into two parts,showing one part in the Liability category and the other part in the Stockholders' Equity category.

If 20,000 shares are authorized,15,000 shares are issued,and 500 shares are held as treasury stock,a cash dividend of $1 per share would amount to $15,000.

A new company issues 2,000 shares of $5 par common stock in exchange for the services of a lawyer during its first month of business.The lawyer's normal fee is $15,000 for similar work.Which of the following would be the impact on the accounting equation if the stock is not currently trading?

A partnership can be owned by one or more entities or individuals.

The Stockholders' Equity section of Calabro,Inc.is as follows: $\begin{array}{lr}\text { Preferred stock, } 7 \%, \$ 10 \text { par, } 1,000 \text { shares authorized, } 300 \text { shares issued } & \$ 3,000 \\\text { Additional paid-in capital—preferred } & 9,000 \\\text { Common stock, } \$ 1 \text { par value, authorized } 15,000 \text { shares, issued 4,000 shares } & 4,000 \\\text { Additional paid-in capital—common } & 20,000 \\\text { Retzined earnings } & 50,000 \\\text { Total contributed capital and retained earnings } & \$ 86,000 \\\text { Less: Treasury stock (1,000 common shares at cost) } & \underline{(6,000)} \\\text { Total stockholders' equity } & \underline{ \$ 80,000} \\\end{array}$ The market price of the stock on December 31,2017,was $8 per share.Answer the following independent questions: A) Calculate the average amount at which each share of common stock was initially sold. B) What balance will be in the Retained Earnings account immediately after the declaration of a 2 -for-1 stock split? C) If a cash dividend of $\$ 1$ per share was declared to both common and preferred stockholders, what would be the bal ance in retained earnings immediately after the declaration? D) What balance will be in the Retained Earnings account immediately after the declaration of a $20 \%$ common stock dividend on December 31,2017 ?

What are the advantages of organizing a company as a corporation instead of a partnership or sole proprietorship?

Select the best answer from the list below to complete statements that follow. $\begin{array} { l l l } \text { Authorized shares } & \text { treasury stock } & \text { book value per share } \\\text { issued shares } & \text { stock dividend } & \text { par value per share } \\\text { outstanding shares } & \text { additional paid-in-capital } & \text { market value per share } \\\text { stock split } & \text { dividend payout ratio } & \text { retained earnings }\end{array}$ -Shares sold or distributed to stockholder are __________.

Fairchild Company acquired a building valued at $210,000 for property tax purposes in exchange for 6,000 shares of its $10 par common stock.The stock is widely traded and selling for $31 per share.At what amount should the building be recorded by Fairchild Company?