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

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Question 41

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At December 31, the stockholders' equity of Smith Company was as follow: Common stock, $5 par value: 1,100,000 shares issued $\begin{array} { l r } \text { and 1,000,000 shares outstanding } & \$ 5,500,000 \\\text { Additional paid-in capital } & 1,400,000 \\\text { Retained earnings } & 1,500,000 \\\text { Treasury stock, (100,000 shares) } &\underline{ ( 700,000 ) } \\ \text { Total stockholders' equity } &\underline{ \$ 7,700,000}\end{array}$ The book value per share of common stock is

A) $7.00
B) $7.20
C) $8.40
D) $7.70

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Question 42

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Preferred stockholders generally do not have the right to vote for the board of directors.

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Question 43

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The acquisition of treasury stock by a corporation increases total assets and total stockholders' equity.

Treasury stock is

Ranier Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ranier issues 5,000 shares of preferred stock for land with an asking price of $575,000 and a market value of $550,000, which of the following would be the journal entry for Ranier to record? a. $\begin{array}{lr}\text { Legal Expense } & 37,500 \\\text { Common Stock } && 9,000 \\\text { Paid-in Capital in Excess of Par - Preferred } && 28,500\end{array}$ b. $\begin{array}{lll}\text { Land } & 500,000 & \\\text { Preferred Stock } & & 500,000\end{array}$ c. $\begin{array}{lrr}\text { Land } & 575,000 & \\\text { Preferred Stock } && 500,000 \\\text { Paid-in Canital in Excess of Par-Preferred } && 75.000\end{array}$ d. $\begin{array}{lrr}\text { Land } & 550,000 & \\\text { Preferred Stock } && 500,000 \\\text { Paid-in Capital Excess of Par-Preferred } && 50,000\end{array}$

Ralston Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ralston issues 9,000 shares of common stock to pay its recent attorney's bill of $37,500 for legal services on a land access dispute, which of the following would be the journal entry for Ralston to record? a. $\begin{array}{ll}\text { Legal Expense }&9,000 \\\text { Common Stock }& & 9,000 \\\end{array}$ b. $\begin{array}{lll}\text { Legal Expense } & 37,500 & \\\quad \text { Common Stock } & & 37,500\end{array}$ c. $\begin{array}{lr}\text { Legal Expense } & 37,500 \\\text { Common Stock } & &9,000 \\\text { Paid-in Capital in Excess of Stated Value - Common } && 28,500\end{array}$ d. $\begin{array}{lr}\text { Legal Expense } & 37,500 \\\text { Common Stock } && 9,000 \\\text { Paid-in Capital in Excess of Par - Preferred } && 28,500\end{array}$

New Corp. issues 2,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, credits are made to

The ability of a corporation to obtain capital is

Retained earnings are occasionally restricted

Which one of the following would not be considered an advantage of the corporate form of organization?

The return on common stockholders' equity is computed by dividing net income available to common stockholders by

Which of the following statements is not considered a disadvantage of the corporate form of organization?

A credit balance in retained earnings represents

Each of the following is correct regarding treasury stock except that it has been

If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to

Which of the following is not a significant date with respect to dividends?

Dividends Payable is classified as a

Dividends in arrears on cumulative preferred stock are considered a liability.

Which of the following is not true of a corporation?

Which one of the following is not necessary in order for a corporation to pay a cash dividend?