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Exam 8: Proprietorships, Partnerships, and Corporations

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Question 61

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Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ Tharp Company appropriated $10,000,000 of retained earnings related to its plans for building a new office building. $\begin{array}{|l|l|l|l|l|l|}\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}\text { Net } \\\text { Income }\end{array} & \begin{array}{c}\text { Cash } \\\text { Flow }\end{array}\\\hline&&&\end{array}$

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Question 62

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Stock of a closely-held corporation does not trade on a stock exchange.

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B) False

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Question 63

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Fredericksburg Corporation had issued and outstanding 150,000 shares of $8 par value common stock at January 1, 2014 with a retained earnings balance of $750,000. Fredericksburg issued a 12% stock dividend to its common shareholders. At the time of the dividend, the market value of the stock was $17 per share. Required: a) What is the total dollar amount of the stock dividend? b) Describe how the stock dividend will affect Fredericksburg's stockholders' equity accounts. c) How many shares of common stock are outstanding after the stock dividend?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ Patrick English and Brad Elison began their new partnership by each contributing $40,000 to their business. Indicate the effects of this transaction on the partnership's financial statements. $\begin{array}{|l|l|l|l|l|l|}\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}\text { Net } \\\text { Income }\end{array} & \begin{array}{c}\text { Cash } \\\text { Flow }\end{array}\\\hline&&&\end{array}$

Davis Corporation had 25,000 shares of $10 par value common stock outstanding and declared a two-for-one stock split. How many shares of stock would then be outstanding and what would be the par value of the new stock?

For 2014, the Hilary Corporation had beginning and ending Retained Earnings balances of $198,054 and $231,000, respectively. Also during 2014, the corporation declared and paid cash dividends of $29,000 and issued stock dividends valued at $16,000. Assuming that no other items affected Retained Earnings and that total expenses were $32,916, what was the amount of revenues for 2014?

What is meant by "double taxation?" Which form of business organization is subject to double taxation?

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

Describe how the following transactions affect the balance sheet, income statement, and statement of cash flows of Askins, Inc.: a) On 2/1/12, Askins purchased for cash, in the open market, 1,000 shares of its own common stock at $40 per share. b) On 7/1/12, 200 of the shares purchased on 2/1/12 were sold at $43 per share.

Griffin, Inc. purchased 200 shares of its own $20 par value stock for $30 cash per share. Which of the following answers reflects how this purchase of treasury stock would affect Griffin's financial statements?

What effect will the declaration and distribution of a stock dividend have on net income and cash flows?

Which of the following is not considered an advantage of the corporate form of business organization?

Allen Corporation was organized on July 15, 2014. It was authorized to issue 150,000 shares of $25 par value common stock and 50,000 shares of 6% cumulative preferred stock. The preferred stock had a stated value of $50 per share. The following stock transactions relate to Allen Corporation. Issued 55,000 shares of common stock for $33 per share. Issued 2,750 shares of the class A preferred stock for $62 per share. Issued 27,500 shares of common stock for $35 per share. Required: a) Indicate the effect of each of these transactions on Allen's financial statements. Include dollar amounts in the model, below. After recording the three transactions, calculate column totals. b) After these transactions have been recorded, what is the total amount of stockholders' equity? c) After these transactions have been recorded, how many shares of common stock are outstanding?

Purchase of treasury stock for cash is what kind of transaction?

The issuance of a stock dividend will

Anstendig Corp. has 250,000 shares of common stock authorized. It has issued 75,000 shares and has reacquired 12,000 of these shares as treasury stock. Anstendig subsequently declared a cash dividend of $3 per share. What is the total amount of dividends that were declared?

Thomas Corp. has the following number of shares of stock outstanding: $\begin{array}{l}\text { Cumulative Preferred stock, } 8 \%, \$ 100 \text { par, }&10,000 \text { shares } \\\text { Common stock, } \$ 10 \text { par } &10,000 \text { shares }\end{array}$ Thomas will distribute $44,000 to the two classes of stockholders this year. Not counting the current year, the preferred stock dividends are two years in arrears. Indicate whether each of the following statements is true or false. 1. Thomas' common stockholders will receive $36,000 of cash dividends 2. The amount of dividends in arrears on preferred stock is zero after the $44,000 of dividends have been paid 3. If the preferred stock was not cumulative, the dividends not paid in previous years would not be paid in the current year 4. When preferred stock is cumulative, no dividends can be paid on common stock so long as there are preferred dividends in arrears 5. Preferred stockholders will receive $24,000 of cash dividends

Explain the significance of a high price-earnings ratio.

Madison Co. paid dividends of $3,000; $6,000; and $10,000 during 2012, 2013 and 2014 respectively. The company had 500 shares of preferred stock outstanding with a $10 per share cumulative dividend. The amount of dividends received by the common shareholders during 2014 would be:

Which type of stock, common or preferred, must all corporations have?