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

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Question 61

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

A) True
B) False

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Question 62

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The declaration, record, and payment dates in connection with a cash dividend of $50,000 on a corporation's common stock are January 15, February 15, and March 15. Journalize the entries required on each date.

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Question 63

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

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

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.

Financial statement data for this year and last year for Hanscombe Corp. are as follows: $\begin{array} { l r r } & \text { Current Year } & \text { Last Year } \\\text { Net income } & \$ 5,600,500 & \$ 4,988,000 \\\text { Preferred dividends } & 60,000 & 60,000 \\\text { Average number of common shares outstanding } & 125,000 & 110,000\end{array}$ Earnings per share for each year were

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 stock dividend is declared, which of the following accounts is credited?

Retained earnings

At December 31, Idaho Company had the following ending account balances: ​ Retained Earnings: $250,000 Preferred Stock ($100 par, 7% cumulative, 10,000 authorized, 5,000 issued and outstanding): $500,000 Treasury Stock: $40,000 Paid-In Capital in Excess of Par-Common Stock: $625,000 Paid-In Capital in Excess of Par-Preferred Stock: $50,000 Common Stock ($5 par value, 500,000 shares authorized, 105,000 issued): $525,000 ​ Prepare the stockholders' equity section of the balance sheet in good form with all of the required disclosures.

Characteristics of a corporation include

Selected transactions completed by Breezeway Construction during the current fiscal year are as follows: ​ ​ Journalize the transactions.

On April 1, 10,000 shares of $5 par common stock were issued at $22, and on April 7, 5,000 shares of $50 par preferred stock were issued at $104. Journalize the entries for April 1 and 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.

The Dayton Corporation began the current year with a retained earnings balance of $32,000. During the year, the company corrected an error made in the prior year, which was a failure to record a 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 $7,000. Compute the year-end retained earnings balance.

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

Under the Internal Revenue Code, corporations are required to pay federal income taxes.

Earnings per share

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

Nebraska Inc. issues 3,000 shares of common stock for $45,000. 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