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Exam 11: Corporations: Organization, Stock Transactions, and Dividends

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Question 21

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A sale of treasury stock may result in a decrease in paid-in-capital. All decreases should be charged to the Paid-In-Capital from Sale of Treasury account.

A) True
B) False

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Question 22

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On May 1, 10,000 shares of $10 par common stock were issued at $30, and on May 7, 5,000 shares of $50 par preferred stock were issued at $111. Journalize the entries for May 1 and May 7.

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Question 23

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One of the prerequisites to paying a cash dividend is sufficient retained earnings.

Prepare entries to record the following:

A prior period adjustment should be reported as an adjustment to the retained earnings balance at the beginning of the period in which the adjustment was made.

The term deficit is used to refer to a debit balance in which of the following accounts of a corporation?

When the board of director's declares a cash or stock dividend, this action decreases retained earnings.

The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called

Par value

The par value of stock is an arbitrary per share amount defined in many states as legal capital.

The par value of common stock must always be equal to its market value on the date the stock is issued.

If a company has preferred stock, the preferred stock dividend is added to net income when computing earnings per common share.

A corporation was organized on January 1 of the current year, with an authorization of 20,000 shares of $4 preferred stock, $12 par, and 100,000 shares of $3 par common stock. The following selected transactions were completed during the first year of operations: Required: Journalize the transactions.

On January 1, 2011 a company had the following data: - issued 10,000 shares of $2.00 par value common stock for $12.00 per share - issued 3,000 shares of $50 par value 6% cumulative preferred stock for $70 per share - purchased 1,000 shares of previously issued common stock for $15.00 per share The company had the following dividend information available: 2011 - No dividend paid 2012 - Paid a $2,000 total dividend 2013 - Paid a $17,000 total dividend 2014 - paid a $32,000 total dividend Using the following format, fill in the correct values for each year;

Samuels, Inc. reported net income for 2011 is $105,000. During 2011 the company had 5,000 shares of $100 par, 5% preferred stock and 20,000 of $5 par common stock outstanding. Samuels' earnings per share for 2011 is

Before a stock dividend can be declared or paid, there must be sufficient cash.

A corporation is a separate entity for accounting purposes but for not legal purposes.

When common stock is issued in exchange for land, the land should be recorded in the accounts at the par amount of the stock issued.

The following transactions took place for the XYZ Corporation; a. November 12th - Declared a total cash dividend of $45,000 for stockholders of record November 20th payable on December 1st. Record the journal entry, if necessary, for the following events; Nov. 12 - Nov. 20 - Dec. 1 - b. Briefly describe the significance of November 20th.

A company has 10,000 shares of $10 par common stock outstanding. Prepare entries to record the following: