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

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Question 21

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The balance in Retained Earnings should be interpreted as representing surplus cash left over for dividends.

A) True
B) False

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Question 22

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Cash dividends become a liability to a corporation on the date of record.

A) True
B) False

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Question 23

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The ability of a corporation to obtain capital is

The financial loss that each stockholder in a corporation can incur is usually limited to the amount invested by the stockholder.

If Dakota Company issues 1,500 shares of $6 par common stock for $75,000,

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is declared?

A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

A corporation has 12,000 shares of $20 par stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.

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

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

The primary purpose of a stock split is to

The date on which a cash dividend becomes a binding legal obligation is on the

A corporation was organized on January 1 of the current year, with an authorization of 20,000 shares of 4%, $12 par preferred stock, and 100,000 shares of $3 par common stock. The following selected transactions were completed during the first year of operations: Jan. 3 Issued 15,000 shares of common stock at $23 per share for cash. 31 Issued 200 shares of common stock to an attorney in payment of legal fees for organizing the corporation. The value of the stock at the time of payment was $25 per share. Feb. 24 Issued 20,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $65,000, $120,000, and $45,000 respectively. Mar. 15 Issued 2,000 shares of preferred stock at $56 for cash. Journalize the transactions.

Prepare entries to record the following selected transactions completed during the current fiscal year: Feb. 1 The board of directors declared a stock split which reduced the par of common shares from $100 to $20. This action increased the number of outstanding shares to 500,000. 11 Purchased 25,000 shares of the company's own stock at $44, recording the treasury stock at cost. May 1 Declared a dividend of $2.50 per share on the outstanding shares of common stock. 15 Paid the dividend declared on May 1. Oct. 19 Declared a 2% stock dividend on the common stock outstanding the fair market value of the stock to be issued is $55). Nov. 12 Issued the certificates for the common stock dividend declared on October 19.

If common stock is issued for an amount greater than par value, the excess should be credited to

If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are held as treasury stock, a cash dividend of $1 per share would amount to $15,000.

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

The two main sources of stockholders' equity are

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

If a corporation is liquidated, preferred stockholders are paid before the creditors and before the common stockholders.