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Exam 12: Corporations: Organization, Stock Transactions, and Dividends

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Question 51

True/False

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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.

A) True
B) False

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Question 52

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When Wisconsin Corporation was formed on January 1, the corporate charter provided for 100,000 shares of $10 par value common stock. The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 8,500 shares of stock at a price of $16 per share.​ The entry to record the above transaction would include a

A) debit to Cash for $85,000
B) credit to Common Stock for $136,000
C) credit to Paid-In Capital in Excess of Par for $51,000
D) debit to Common Stock for $85,000

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

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Question 53

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For the current year ended, ABC had the following transactions: - 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% preferred stock for $70 per share.- Purchased 1,000 shares of previously issued common stock for $15.00 per share.- Reported net income of $200,000.- Declared and paid a total dividend of $40,000.​ Assume that retained earnings had a beginning balance of $75,000.The company does not have any stock outstanding as of the beginning of the current year.​ a.Treasury stock b.Retained earnings c.Preferred stock d.Excess of issue price over par (preferred)e.Common stock f.Total paid-in capital g.Excess of issue price over par (common)h.Total stockholders' equity -$100,000

The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.

On March 4 of the current year, Barefoot Bay, Inc. reacquired 5,000 shares of its common stock at $89 per share. On August 7, Barefoot Bay sold 3,500 of the reacquired shares at $100 per share. The remaining 1,500 shares were sold at $88 per share on November 29.(a)Journalize the transaction of March 4, August 7, and November 29.(b)What is the balance in Paid-in Capital from Sale of Treasury Stock on December 31 of the current year? (c)Why might Barefoot Bay Inc. have purchased the treasury stock?

A company has 10,000 shares of $10 par common stock outstanding. Prepare entries to record the following: (a)Purchased 1,000 shares of treasury stock at $12. The treasury stock is accounted for by the cost method. There were no previous purchases of treasury shares.(b)Sold 500 shares of treasury stock at $15.(c)Purchased equipment for $75,000, paying $25,000 in cash and issuing 4,000 shares of common stock for the remaining.(d)Sold 500 shares of treasury stock at $11.

The authorized stock of a corporation

The entry to record the issuance of common stock at a price above par includes a debit to

Twenty percent of all businesses in the United States are corporations, and they account for 80% of the total business dollars generated.

A corporation purchased 1,000 shares of its own $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale?

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. What is the amount of the debit to Cash on May 1 and May 7?

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 on the income statement.

A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

A corporation has 50,000 shares of $25 par stock outstanding that has a current market value of $150 per share. If the corporation issues a 5-for-1 stock split, the market value of the stock after the split will be approximately

Double taxation is a disadvantage of a corporation because the corporation has to pay income taxes at twice the rate applied to partnerships.

Which of the following is not classified as paid-in capital on the balance sheet?

Nexis Corp. issues 1,000 shares of $15 par value common stock at $22 per share. When the transaction is recorded, credit(s) are made to:

A disadvantage of the corporate form of business entity is

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.​

A large retained earnings account means that there is cash available to pay dividends.