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Exam 20: Corporations: Formation and Capital Stock Transactions

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Question 1

Multiple Choice

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Which of the following statements is not correct?

A) The Paid-in Capital in Excess of Par Value-Common Stock account appears in the Stockholders' Equity section of the balance sheet.
B) The Subscriptions Receivable account is shown in the Stockholders' Equity section of the balance sheet.
C) The balance of the Common Stock account appears in the Stockholders' Equity section of the balance sheet.
D) The balance of the Preferred Stock account appears in the Stockholders' Equity section of the balance sheet.

E) All of the above
F) C) and D)

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B

Question 2

True/False

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Preferred Stock is shown in the Stockholders' Equity section of the balance sheet.

A) True
B) False

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Question 3

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Profits in the form of ____________________ are paid to the stockholders of a corporation.

If a corporation sells 400 shares of 12 percent, $100 par-value preferred stock for $105 a share, the entry to record the transaction will include a credit of ____________________ to the Preferred Stock account.

Rukshad Patel, the owner of a sole proprietorship, is planning to incorporate her business. Her capital account has a balance of $200,000 after revaluation of the assets. Her cash account totals $60,000. She will receive 10 percent, $10 par-value preferred stock with a total par value equal to the cash transferred. The balance of her capital is to be exchanged for shares of $2 par-value common stock with a total par value equal to the remaining capital. How many shares of preferred stock should be issued to Patel? How many shares of common stock should be issued to Patel?

Cary Company, a newly organized corporation, received a bill from its lawyers for $7,500 for time spent in organizing the company. 1. How should these costs be treated for federal income tax purposes? 2. How should they be treated in the company's financial statements?

When the issuing corporation retains the right to repurchase shares of preferred stock at a specified price, the preferred stock is said to be

The conversion ratio is the number of shares of common stock for which a share of convertible preferred stock may be exchanged.

A corporation has 2,000 shares of 10 percent, $50 par-value preferred stock and 20,000 shares of $5 par-value common stock outstanding. If the board of the directors decides to distribute dividends totaling $80,000, the common stockholders will receive a dividend of

The Maynard Corporation has outstanding 10,000 shares of 10 percent, $50 par-value, cumulative, nonparticipating preferred stock and 80,000 shares of $10 par-value common stock. The board of directors voted to distribute $40,000 as dividends in 2013, $55,000 in 2014, and $65,000 in 2012. Compute the following: 1. Total dividend paid to preferred stockholders in 2013. 2. Total dividend paid to common stockholders in 2013. 3. Total dividend paid to preferred stockholders in 2014. 4. Total dividend paid to common stockholders in 2014. 5. Total dividend paid to preferred stockholders in 2012. 6. Total dividend paid to common stockholders in 2012.

A corporation has 10,000 shares of 6 percent, $50 par-value cumulative preferred stock and 50,000 shares of $4 par-value common stock outstanding. Last year, no dividends were paid. This year, the board of directors decided to pay a dividend of $80,000. The common stockholders will receive a dividend of

Stock is issued to investors at the time they sign the stock subscription contract.

One disadvantage of a corporation is

Chicagoland Landscape Company, a newly organized corporation, received a bill from its lawyers for $10,000 for time spent in organizing the company. 1. How should these costs be treated in the company's accounting records? Why? 2. How should they be treated for federal income tax purposes?

A corporation received a subscription for 100 shares of 10 percent, $100 par-value preferred stock at $103 a share. The entry to record this transaction consists of a debit to Subscriptions Receivable-Preferred for $10,300 and a credit to

The Lompoc Corporation is authorized to issue 500,000 shares of $4 par-value common stock and 100,000 shares of 6 percent, $100 par-value preferred stock. Record the following transactions on page 1 of a general journal. Omit descriptions.

A separate Common Stock account is kept in the general ledger for each common stockholder of a corporation.

Subchapter S corporations

The Common Stock Subscribed account has a(n) ____________________ balance.

A corporation received a subscription for 1,000 shares of 10 percent, $100 par-value preferred stock at $103 a share. The entry to record this transaction consists of a debit to Subscriptions Receivable-Preferred for $103,000 and a credit to