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

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Question 81

True/False

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If 100 shares of treasury stock were purchased for $50 per share and then sold at $60 per share, $1,000 of income is reported in the income statement.

A) True
B) False

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Question 82

Multiple Choice

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The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?

A) $60,000
B) $5,000
C) $100,000
D) $55,000

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

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Question 83

Multiple Choice

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When a corporation completes a 3-for-1 stock split

A corporation has 60,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the number of shares outstanding will be:

The main source of paid-in-capital is from issuing stock.

A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for

The primary purpose of a stock split is to

Double taxation is a disadvantage of a corporation because the same party has to pay taxes twice on the income.

The amount of capital paid in by the stockholders of the corporation is called legal capital.

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

The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.

The declaration of a cash dividend decreases a corporation's stockholders equity and decreases its assets.

Using the following information, prepare the Stockholders' Equity section of the balance sheet. Seventy thousand shares of common stock are authorized and 7,000 shares have been reacquired.

Which of the following is not a right possessed by common stockholders of a corporation?

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

The Dayton Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance.

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.

On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 2,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx. The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a

The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to

The par value per share of common stock represents