Q&A Hero

Q: Common shareholders always share equally with all other shareholders in all dividends.

Q: A proxy is a document that gives a designated agent the right to vote a shareholder's stock.

Q: The only way that a shareholder can affect the management of a corporation is to get elected to the corporation's board of directors.

Q: Organization expenses of a corporation often include legal fees and promoter fees.

Q: Corporations are subject to substantially fewer regulations and laws than are proprietorships and partnerships.

Q: When preferred stock is cumulative and the directors either do not declare a dividend to preferred stockholders or declare one that does not cover the total amount of cumulative dividends, the unpaid amount is called ____________________________.

Q: __________________________ is the annual amount of cash dividends distributed to common shareholders relative to the stock's market price.

Q: _______________________ is the stockholders' equity applicable to common shares divided by the number of common shares outstanding.

Q: _____________ is the amount of income earned per share of a company's outstanding common stock.

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Q: ___________________________ are corrections of material errors in prior period financial statements.

Q: The least amount that the buyers of stock must contribute to the corporation or be subject to paying at a future date is called ____________________________.

Q: _____________________ is a general term that refers to any shares issued to obtain owner financing in a corporation.

Q: Stock that is not assigned a value per share by the corporate charter is called _________.

Q: ________________ is a class of stock assigned a value by the corporation in its charter.

Q: The cumulative net income and loss retained by a corporation is called ____________.

Q: The total amount of cash and other assets the corporation receives from its stockholders in exchange for common stock is called __________________________.

Q: ________________________ is the number of shares that a corporation's charter allows it to sell.

Q: A stock _________________ keeps stockholder records and prepares official lists of stockholders for stockholder meetings and dividend payments.

Q: The _______________________ protects stockholders' proportional interest in a corporation by allowing them to purchase their proportional share of any common stock later issued by the corporation.

Q: A corporation is responsible for its own acts and debts. This is because a corporation is considered a ____________________________________.

Q: _______________________ are responsible for and have final authority for managing a corporation's activities.

Q: Record the following transactions of a company in general journal form: (a) Reacquired 8,000 of its own $10 par value common stock at $40 cash per share. The stock was originally issued at $15 per share. (b) Sold 2,000 shares of the stock reacquired under part (a) at $43 cash per share. (c) Sold 3,000 shares of the stock reacquired under part (a) at $39 cash per share.

Q: On January 10, a corporation purchased 5,000 shares of its own common stock at $17.50 per share. On August 4, a total of 1,000 treasury shares were sold at $19.00 per share. These are the only treasury stock transactions ever made by the corporation. Prepare the journal entries required on January 10 and August 4.

Q: A company reported the following stockholders' equity on January 1 of the current year: Common stock, $10 par, 1,000,000 shares authorized, 400,000 shares issued .. $ 4,000,000 Paid-in capital in excess of par, common 1,200,000 Retained earnings 1,600,000 Total stockholders' equity ... $6,800,000 Prepare journal entries for the following selected transactions related to this company's stock during the current year: Mar. 1 Purchased 10,000 shares of treasury stock for $17 per share. May 5 Sold 4,000 shares of treasury stock for $16 per share. Oct. 12 Sold 2,000 shares of treasury stock for $18 per share.

Q: A company had the following stockholders' equity on January 1: Common Stock - $1 par value; 1,000,000 shares authorized, 400,000 shares issued and outstanding . $ 400,000 Paid-in capital in excess of par value, common stock .... 300,000 Retained earnings 364,000 Total stockholders' equity $1,064,000 On January 10, the company declared a 40% stock dividend to holders of record on January 25, to be distributed January 31. The market value of the stock on January 10 prior to the dividend was $20 per share. What is the book value per common share on February 1?

Q: A corporation had stockholders' equity on January 1 as follows: Common Stock, $10 par value, 1,500,000 shares authorized, 600,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $2,500,000. Prepare journal entries to record the following transactions: Feb. 15 The board of directors declared a 10% stock dividend to stockholders of record on March 1, to be issued on April 15. The stock was trading at $12 per share prior to the dividend. Mar. 31 Sold 100,000 shares of common stock for $11 per share. Apr. 15 Issued the stock dividend.

Q: A corporation had stockholders' equity on January 1 as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 500,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $3,000,000. Prepare journal entries to record the following transactions: Feb. 15 The board of directors declared a 5% stock dividend to stockholders of record on March 1, to be issued on March 20. The stock was trading at $6 per share prior to the dividend Mar. 1 The date of record. Mar. 20 Issued the stock dividend.

Q: On May 1, a company's board of directors declared a 10% stock dividend to be distributed on June 1 to the stockholders of record on May 21. The company had 250,000 shares of $10 par value common stock outstanding with a market value of $22 per share. Prepare the journal entries required on May 1, May 21, and June 1.

Q: A corporation has 200,000 shares of $10 par value common stock outstanding. The following selected transactions related to the company's stock took place during the current year: Apr. 15 Declared a 40% stock dividend to stockholders of record on May 1, to be issued May 10. The current market value is $15 per common share. May 1 Date of record. May 10 Issued the common stock dividend. Prepare the journal entries to record these transactions.

Q: For each of the following independent transactions a through d, prepare the necessary journal entry: (a) Declared a $0.40 per share cash dividend on 200,000 shares of preferred stock outstanding. (b) Declared and distributed a 12% stock dividend on 800,000 shares of $5 par value common stock outstanding. Market price per common share on this date was $25. (c) Declared and distributed a 2-for-1 stock split on 500,000 shares of $10 par value common stock outstanding. (d) Declared and distributed a 30% stock dividend on 400,000 common shares of $5 par value common stock outstanding. Market price per common share on this date was $20.

Q: A company reported stockholders' equity on January 1 of the current year as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 600,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,025,000; Retained Earnings, $2,850,000. Prepare journal entries to record the following transactions: May 1 A cash dividend of $1.10 per common share was declared by the board of directors to stockholders of record on May 20, payable June 1. May 20 The date of record. June 1 Paid the cash dividend.

Q: A company was organized in January 2012 and has 2,000 shares of $100 par value, 10%, nonparticipating preferred stock outstanding and 30,000 shares of $10 par value common stock outstanding. It has declared and paid cash dividends each year as shown below. Calculate the total dividends distributed to each class of stockholder under each of the assumptions given. Assuming Preferred Assuming Preferred Stock Stock Cash Is Noncumulative Is Cumulative Dividends Declared Preferred Common Preferred Common Year and Paid Dividend Dividend Dividend Dividend 2012 $15,000 ________ ________ ________ ________ 2013 $36,000 ________ ________ ________ ________ 2014 $60,000 ________ ________ ________ ________

Q: A company has $100,000 of 10% noncumulative, nonparticipating, preferred stock outstanding, and $150,000 of common stock outstanding. In the company's first year of operation, no dividends were paid, but during the second year, it paid cash dividends of $25,000. Compute the dividends to be distributed to (1) preferred shares and (2) common shares.

Q: A corporation had the following stock outstanding when the company's board of directors declared a $95,000 cash dividend during the current year: Preferred stock, $100 par, 6%, 5,000 shares issued $ 500,000 Common stock, $10 par, 75,000 shares issued .. 750,000 Total $ 1,250,000 Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is cumulative and nonparticipating and dividends are one year in arrears.

Q: A corporation had the following stock outstanding when the company's board of directors declared a $95,000 cash dividend in the current year: Preferred stock, $100 par, 6%, 5,000 shares issued $ 500,000 Common stock, $10 par, 70,000 shares issued . 700,000 Total .. $1,200,000 Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is noncumulative and nonparticipating.

Q: On August 1, a corporation issued 15,000 shares of no-par common stock in exchange for a tract of land having a market value of $215,000. The common stock has a stated value of $10 per share. Prepare the general journal entry to record this transaction.

Q: The stockholders' equity section of a corporation's balance sheet follows: Preferred stock, $25 par value, 6%, cumulative, 10,000 shares authorized, 5,000 shares issued and outstanding .. $125,000 Paid-in capital in excess of par value, Preferred stock. 50,000 Common stock, $10 par value, 50,000 shares authorized, 10,000 shares issued and outstanding... 100,000 Paid-in capital in excess of par value, Common stock 40,000 Retained earnings . 95,000 Total stockholders' equity . $410,000 (1) Assuming that the preferred stock is not callable and no dividends are in arrears, compute the book values per preferred share and per common share. (2) Assuming that the preferred stock has a call price of $30 per share and one year of cumulative preferred dividends is in arrears, compute the book values per preferred share and per common share.

Q: A corporation reports the following year-end stockholders' equity: Paid-in capital: Preferred stock, 8%, 100,000 shares authorized, 50,000 shares issued . $ 2,500,000 Paid-in capital in excess of par, Preferred.. 125,000 Common stock, $10 par, 500,000 shares Authorized, 400,000 shares issued .. 4,000,000 Paid-in capital in excess of par, Common .. 1,200,000 Total paid-in capital .. $ 7,825,000 Retained earnings .. 10,775,000 Total stockholders' equity . $18,600,000 Determine the following: (1) Par value for the preferred stock. (2) Book value per share for both preferred stock and common stock assuming a call price per share of $52 for preferred and no dividends in arrears.

Q: The stockholders' equity section of a company's year-end balance sheet follows: Preferred stock, $100 par value, 9% cumulative and nonparticipating, 5,000 shares outstanding $500,000 Paid-in capital in excess of par value, preferred stock 50,000 Total capital paid-in by preferred Stockholders .. $550,000 Common stock, $5 par value, 150,000 shares outstanding . $750,000 Paid-in capital in excess of par value, common stock ... 150,000 Total capital paid-in by common Stockholders . 900,000 Total paid-in capital $1,450,000 Retained earnings 1,660,000 Total stockholders equity $3,110,000 The preferred stock has a call price of $103 per share plus dividends in arrears. Only one year of dividends is in arrears. Calculate the book value per (1) preferred share, and (2) common share.

Q: 178. A company reports the following stockholders' equity: Paid-in Capital: Common stock, $10 par, 500,000 shares authorized .. $3,000,000 Paid-in capital in excess of par, Common stock . 1,300,000 Total paid-in capital $4,300,000 Retained earnings 1,400,000 Total stockholders' equity $5,700,000 Compute the (1) number of common shares outstanding and (2) book value per common share.

Q: A company has $2,400,000 in stockholders' equity that includes 500 shares of $50 par value noncallable preferred stock outstanding and 250,000 shares of common stock outstanding. Calculate the book value per (1) preferred share, and (2) common share.

Q: A corporation has $1,750,000 in stockholders' equity and 350,000 weighted-average shares of common stock outstanding. Calculate the book value per common share.

Q: A company has 500,000 common shares authorized, 400,000 common shares issued, and 15,000 common shares in treasury stock at the current year-end. It paid $0.24 per share in cash dividends during the year. The year-end market price of the stock is $15. Calculate (1) the total dividends paid and (2) the dividend yield.

Q: A company paid a cash dividend of $0.44 per share during the current year, and reported 18,000 shares of common stock issued, and 2,000 common shares in treasury stock during the current year. The year-end market price per share was $27.50. Calculate the following: (1) total amount of cash dividends paid to common shareholders, and (2) dividend yield.

Q: A company reported earnings per share of $9.75, paid a $6.00 cash dividend per share to preferred shareholders, and paid a $0.54 cash dividend per share to common shareholders. There were 1,000 shares of preferred stock outstanding and 6,000 shares of common stock outstanding during the year, and the market price per share of common stock was $45. Calculate the company's dividend yield for common stock.

Q: A corporation paid a cash dividend of $0.07 per share during the current year. It had 550,000 common shares outstanding at year-end, its current year earnings per share was $3.85, and the stock's year-end market price was $17.50 per share. Calculate the company's dividend yield.

Q: A company's stock is selling for $35 per share at year-end. This current year it paid shareholders a $2.45 per share cash dividend, reported earnings per share of $12.00, and had 750,000 common shares outstanding at year-end. Calculate the company's dividend yield.

Q: A company reported net income of $478,000 and paid $5,500 in preferred cash dividends during the current year. The company had 100,000 common shares issued, and 10,000 common shares in treasury during the year. The year-end market price per common share was $43.05. Calculate the company's price-earnings ratio.

Q: Nguyen invested $100,000 and Hansen invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Nguyen and a $40,000 per year salary allowance to Hansen, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $105,000 in income are: A. $52,500 to Nguyen; $52,500 to Hansen. B. $35,000 to Nguyen; $70,000 to Hansen. C. $57,500 to Nguyen; $47,500 to Hansen. D. $42,500 to Nguyen; $62,500 to Hansen. E. $70,000 to Nguyen; $60,000 to Hansen.

Q: Which of the following statements is true? A. Partners are employees of the partnership. B. Salaries to partners are expenses on the partnership income statement. C. Salary allowances usually reflect the relative value of services provided by partners. D. Salary allowances are expenses. E. Interest allowances are expenses.

Q: Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Shelby to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Shelby and Mortonson's respective shares are: A. $67,500; $67,500. B. $92,500; $42,500. C. $57,857; $77,143. D. $90,000; $40,000. E. $35,000; $100,000.

Q: Rice, Hepburn, and DiMarco formed a partnership with Rice contributing $60,000, Hepburn contributing $50,000 and DiMarco contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to DiMarco's capital account? A. $20,000. B. $25,000. C. $30,000. D. $40,000. E. $75,000.

Q: In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance: A. Is ignored when earnings are not sufficient to pay interest. B. Can make up for unequal capital contributions. C. Is an expense of the business. D. Must be paid because the partnership contract has unlimited life. E. Legally becomes a liability of the general partner.

Q: In the absence of a partnership agreement, the law says that income (and loss) should be allocated based on: A. A fractional basis. B. The ratio of capital investments. C. Salary allowances. D. Equal shares. E. Interest allowances.

Q: Trump and Hawthorne have decided to form a partnership. Trump is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership. The following information regarding the asset to be contributed by Trump is available: Historical cost of the asset $76,000 Accumulated depreciation on the asset $40,000 Note payable secured by the asset* $18,000 Agreed-upon market value of the asset $45,000 *will be assumed by the partnership Based on this information, Trump's beginning equity balance in the partnership will be: A. $76,000 B. $36,000 C. $18,000 D. $27,000 E. $45,000

Q: Collins and Farina are forming a partnership. Collins is investing a building that has a market value of $80,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Farina is investing $20,000 cash. The balance of Collins' Capital account will be: A. $80,000. B. $24,000. C. $56,000. D. $44,000. E. $60,000.

Q: Chen and Wright are forming a partnership. Chen will invest a building that currently is being used by another business owned by Chen. The building has a market value of $90,000. Also, the partnership will assume responsibility for a $30,000 note secured by a mortgage on that building. Wright will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Chen's Capital account are: A. Building, $90,000 and Chen, Capital, $90,000. B. Building, $60,000 and Chen, Capital, $60,000. C. Building, $60,000 and Chen, Capital, $50,000. D. Building, $90,000 and Chen, Capital, $60,000. E. Building, $60,000 and Chen, Capital, $90,000.

Q: The withdrawals account of each partner is: A. Closed to that partner's capital account with a credit. B. Closed to that partner's capital account with a debit. C. A permanent account that is not closed. D. Credited with that partner's share of net income. E. Debited with that partner's share of net loss.

Q: Partners' withdrawals of assets are: A. Credited to their withdrawals accounts. B. Debited to their withdrawals accounts. C. Credited to their retained earnings. D. Debited to their retained earnings. E. Debited to their asset accounts.

Q: Partnership accounting: A. Is the same as accounting for a sole proprietorship. B. Is the same as accounting for a corporation. C. Is the same as accounting for a sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner. D. Is the same as accounting for an S corporation. E. Is the same as accounting for a corporation, except that retained earnings is used to keep track of partners' withdrawals.

Q: Partnership accounting: A. Uses a capital account for each partner. B. Uses a withdrawals account for each partner. C. Allocates net income to each partner according to the partnership agreement. D. Allocates net loss to each partner according to the partnership agreement. E. All of the choices are correct.

Q: The following information is available regarding John Smith's capital account in Technology Consulting Group, a general partnership, for a recent year: Beginning of the year balance $22,000 His share of partnership income $ 8,500 Withdrawals made during the year $ 6,000 What is Smith's partner return on equity during the year in question? A. 36.6% B. 34.7% C. 10.8% D. 11.4% E. 55.7%

Q: Web Services is organized as a limited partnership, with David White as one of its partners. David's capital account began the year with a balance of $45,000. During the year, David's share of the partnership income was $7,500, and David received $4,000 in distributions from the partnership. What is David's partner return on equity? A. 7.8% B. 8.9% C. 15.4% D. 16.0% E. 16.7%

Q: Renee Jackson is a partner in Sports Promoters. Her beginning partnership capital balance for the current year is $55,000, and her ending partnership capital balance for the current year is $62,000. Her share of this year's partnership income was $5,250. What is her partner return on equity? A. 8.47% B. 8.97% C. 9.54% D. 10.47% E. 10.60%

Q: A partnership in which all partners have mutual agency and unlimited liability is called: A. Limited partnership. B. Limited liability partnership. C. General partnership. D. S corporation. E. Limited liability company.

Q: David and Jeannie formed This & That as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as: A. An S corporation. B. A C corporation. C. A non-taxable entity. D. A joint venture. E. A partnership.

Q: Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership. Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties? A. The partner's authority must be derived from the partnership agreement. B. The partner's authority may be effectively limited by a formal resolution of the other partners, even if third parties are not aware of that limitation. C. Only a partner with a majority interest in a partnership has the authority to represent the partnership to third parties. D. A partner has authority to deal with third parties on the behalf of the other partners only if he has written permission to do so. E. A partner may be able to legally bind the partnership to actions even if the other partners are unaware of his actions.

Q: A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a: A. Partnership. B. Limited partnership. C. Limited liability partnership. D. General partnership. E. Limited liability company.

Q: A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is a: A. Mutual agency partnership. B. Limited partnership. C. Limited liability partnership. D. General partnership. E. Limited liability company.

Q: Mutual agency means A. Creditors can apply their claims to partners' personal assets. B. Partners are taxed on partnership withdrawals. C. All partners must agree before the partnership can act. D. The partnership has a limited life. E. A partner can commit or bind the partnership in any contract within the scope of the partnership business.

Q: A partnership agreement: A. Is not binding unless it is in writing. B. Is the same as a limited liability partnership. C. Is binding even if it is not in writing. D. Does not generally address the issue of the rights and duties of the partners. E. Is also called the articles of incorporation.

Q: Disadvantages of a partnership include: A. Limited life. B. Mutual agency. C. Unlimited liability. D. Co-ownership of property. E. All of the choices are disadvantages.

Q: An unincorporated association of two or more persons to carry on a business for profit as co-owners is a: A. Partnership. B. Proprietorship. C. Contractual company. D. Mutual agency. E. Voluntary organization.

Q: If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability.

Q: A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring losses in prior periods.

Q: A capital deficiency exists when all partners have a credit balance in their capital accounts.

Q: When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Q: When the current value of a partnership is greater than the recorded amounts of equity, the current partners usually require any new partner to pay a bonus for the privilege of joining.

Q: Admitting a partner by accepting assets is a personal transaction between one or more current partners and the new partner.