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Exam 11: Proprietorships, Partnerships, and Corporations

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Question 71

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Which of the following is a disadvantage of a sole proprietorship?

A) Entrenched management.
B) Unlimited liability.
C) Double taxation.
D) Excessive regulation.

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

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Question 72

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A sole proprietorship was formed on January 1, 2013, when it received $180,000 cash from Grant Godwin, the owner. During 2013, the business earned $276,000 in cash revenues and paid $204,800 in cash expenses. Jones withdrew $32,000 in cash during the year. Required: Prepare an income statement, capital statement, balance sheet, and statement of cash flows for the 2013 fiscal year.

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Question 73

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On January 12, 2013, Grove Park Corporation issued 550 shares of $12 par-value common stock for $15 per share. The number of shares authorized is 5,000, and the number of shares outstanding prior to this transaction is 1,200. Which of the following answers describes the effect of the January 12, 2013 transaction?

The Dillard-Hughes Company was started on January 1, 2013 as a partnership. The initial investments from the two partners were $100,000 from Dillard and $60,000 from Hughes. During 2013, Dillard-Hughes Company earned $110,000 in cash revenue, paid $80,000 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 Dillard-Hughes Company.

Articles of incorporation, prepared by a business that wishes to incorporate, normally include the corporation's name and purpose, its location, and provisions for capital stock.

During 2013, the Havens Corporation and the Childress Corporation reported net incomes of $280,000 and $500,000 respectively. Both companies had 200,000 shares of common stock issued and outstanding. At December 31, 2013, the market price per share of Havens' stock was $42 and Childress' stock was $35. Required: a) Calculate the price-earnings ratio for each company. b) Based on the price-earnings ratios computed in part (a), which company do investors believe has more potential for future income growth? State your reason.

The class or type of stock that every corporation must have is preferred stock.

The entry to record the dividend on March 1 will have which of the following financial statement effects?

Which of the following entities would report income tax expense on its income statement?

Curren Co. paid dividends of $3,000; $6,000; and $10,000 during 2010, 2011 and 2012, respectively. The company had 500 shares of 5%, $200 par value preferred stock outstanding that paid cumulative dividend. The amount of dividends received by the common shareholders during 2012 would be:

What is a common reason for a corporation to "split" its stock?

Garrison Corporation has the following stock outstanding: In 2013, Garrison paid $300,000 in dividends. No dividends were paid in 2011 or 2012. Required: a) Compute the total amount of dividends that was paid to each class of stock in 2013. b) Compute the amount of dividends per share for each class of stock

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

Frost Corporation reported net income of $65,000 in 2013. The company had 90,000 shares of $12 par value common stock outstanding and a market price of $18 per share. Frost's price-earnings ratio was closest to:

Which type of stock, common or preferred, must all corporations have?

In accordance with restrictive debt covenants, Morris Company appropriated $30,000 of retained earnings. Which of the following entries would be required to recognize this appropriation?

A sole proprietorship was established on January 1, 2013, when it received $60,000 cash from Juanita Perez, the owner. During 2013, the business earned $160,000 in cash revenues and paid $124,000 in cash expenses. Perez withdrew $18,000 from the business during 2013. Required: Indicate how each of the transactions and events for the Perez sole proprietorship affects the financial statements model, below. Indicate dollar amounts of increases and decreases. For cash flows, indicate whether each is an operating activity (OA), investing activity (IA), or financing activity (FA). Indicate NA if an element is not affected by a transaction.

Johansson Co. issued 10,000 shares of common stock for $35 per share. The stock has a par value of $10.

Gravely Co. declared a 2-for-1 stock split. Before that announcement, Gravely had 20,000 shares of outstanding common stock.

Explain the differences in recording the initial issue of stock for (a) par-value, (b) stated- value, and (c) no-par stock.