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Exam 8: Proprietorships, Partnerships, and Corporations

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Question 81

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Indicate whether each of the following statements about treasury stock is true or false. 1. A purchase of treasury stock is reported in the investing activities section of the statement of cash flows 2. The Treasury Stock account is classified as a contra equity account 3. The purchase of treasury stock is an asset exchange transaction 4. Corporations sometimes buy back their own stock to prevent hostile takeovers 5. One reason for a corporation to buy its own stock is to make a quick profit on the reissue of the stock

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1. False
2...

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Question 82

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The difference between the corporate form of business organization and other forms is most clearly shown in which of the following sections of the financial statements?

A) equity section of the balance sheet
B) expenses section of the income statement
C) assets section of the balance sheet
D) operating activities section of the statement of cash flows

E) B) and C)
F) None of the above

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Question 83

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Wiley Corporation issued 5,000 shares of no-par common stock for $32 per share. For this transaction, Common Stock should be credited (increased) for $160,000.

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. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ Slovensky Co. paid a $200,000 cash dividend to its shareholders on July 5, 2014; the dividend had been declared by the board of directors on May 20, 2014. Show the financial statement effects of payment of the dividend. $\begin{array}{|l|l|l|l|l|l|}\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}\text { Net } \\\text { Income }\end{array} & \begin{array}{c}\text { Cash } \\\text { Flow }\end{array}\\\hline&&&\end{array}$

Which of the following is not normally a preference given to the holders of preferred stock?

STU Corporation is authorized to issue 500,000 shares of $12.00 par value common stock. As of December 2014, STU's stockholders' equity accounts report the following balances: At the end of 2014, ABD decided to issue a 15% stock dividend, when the market price of the stock was $14 per share. Determine the dollar amount to be transferred from Retained Earnings to paid-in capital accounts as a result of the stock dividend.

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. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ Seward Co. declared a 2 for 1 stock split. Before that announcement, Seward had 20,000 shares of outstanding common stock with a par value of $10 per share. $\begin{array}{|l|l|l|l|l|l|}\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}\text { Net } \\\text { Income }\end{array} & \begin{array}{c}\text { Cash } \\\text { Flow }\end{array}\\\hline&&&\end{array}$

Describe cumulative preferred stock.

Which form of business organization is established as a separate legal entity from its owners?