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Exam 11: Proprietorships,partnerships,and Corporations

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Question 41

Multiple Choice

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Which of the following is a contra equity account?

A) Retained Earnings
B) Paid-in Capital in Excess of Par Value
C) Treasury Stock
D) Appropriated Retained Earnings

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

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Question 42

True/False

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Lack of ease in transferability of ownership is one of the disadvantages of the corporate form of business organization.

A) True
B) False

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Question 43

Multiple Choice

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Rocco Corporation decides to issue a 7.5% stock dividend on 20,000 outstanding shares of $10 stated value common stock.The distribution is made at the time the market value of the stock is $50 a share.How will the entry to record this transaction affect the company's stockholders' equity accounts?

Montana Company was authorized to issue 200,000 shares of common stock.The company had issued 50,000 shares of stock when it purchased 10,000 shares of treasury stock.After the purchase of treasury stock,the number of outstanding shares of common stock was which of the following?

Which of the following statements is the most common explanation as to why a company might have a negative amount of total stockholders' equity on its balance sheet?

On June 10,Year 1,Burton Builders,Inc. ,a publicly traded company,announced that it had been awarded a contract to build a football stadium at a contract price of $500 million.This contract would increase its projected revenues by 20% over the next three years.Which of the following statements is correct with regard to this announcement?

Franklin Corporation reported net income of $75,000 in Year 1.The company had 100,000 shares of $12 par value common stock outstanding and a market price of $18 per share.What is Franklin's price-earnings ratio?

The number of shares of stock outstanding generally is greater than the number of shares of stock issued.

An advantage of the corporate form of business organization is that corporations are free from double taxation.

Ben Weaver is planning to invest in one of the following companies based on their average performance over the past five years,summarized below. If Ben is looking for a company that is likely to achieve rapid growth in revenues and profitability,which one should he choose?

Ogilvie Corp.issued 12,000 shares of no-par stock for $40 per share.Ogilvie was authorized to issue 35,000 shares.What effect will this event have on the elements of the company's financial statements?

Fixit Corporation issued 20,000 shares of $20 par value common stock at its current market price of $32.How does this event affect total stockholders' equity?

All corporations are subject to extensive government regulation.

Which of the following describes,in part,how the declaration of a stock dividend affects the elements of the financial statements?

Curtain Co.paid dividends of $6,000,$12,000,and $20,000 during Year 1,Year 2,and Year 3,respectively.The company had 1,000 shares of 5%,$200 par value preferred stock outstanding that paid a cumulative dividend.What is the total amount of dividends paid to common shareholders during Year 3?

How does the payment of a previously declared cash dividend affect the elements of the financial statements?

Napoli Industries had net income for Year 2 of $650,000.Napoli had an average number of shares outstanding at the end of the year of 500,000 shares.On January 1,Year 2,the market price of Napoli's stock was $20 per share.On December 31,Year 2,the market price was $22 per share.What is the price-earnings ratio for Napoli at the end of Year 2?

What is meant by the term "double taxation?"

On March 1, Year 1, Gilmore Incorporated declared a cash dividend on its 1,500 outstanding shares of $50 par value, 6% preferred stock. The dividend will be paid on May 1, Year 1 to the stockholders of record as of April 1, Year 1. -How will the entry to record the declaration of the dividend on March 1 affect the elements of the financial statements?

When a corporation records a stock dividend,it debits Retained Earnings for the par value of the stock.