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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

Identify the disadvantages of the corporate form of business. (Check all that apply.)
 
Corporate taxation
Government regulation
   
A charter application usually must be signed by the prospective stockholders called incorporators.
Then, it is filed with the appropriate state official.
 
Promoters
   
A corporation is created by obtaining a charter from:
 
the state government
   
The costs to start a corporation are called expenses.
 
organization
   
Stockholders elect the board of
 
directors
   
The stockholders of a corporation elect the
 
board of directors
   
A ___________ is an entity created by law that is separate from its owners.
Owners are called stockholders or shareholders. These entities can be privately or publicly held.
 
Corporation
   
No-par value stock is stock not assigned a value per share by the corporate charter.
Its advantage is that ___________.
 
there is no minimum legal capital
   
Zion, Inc. declares a 10% stock dividend when there are 10,000 shares of
$1 par value stock issued and outstanding and the market value is $5 per
share. On the date of payment, Zion will issue the stock and record the
transaction with which of the following entries? (Check all that apply.)
 
Debit to Common Stock Dividend Distributable for $1,000.
Credit to Common Stock for $1,000.
   
There are several reasons why a board of directors would authorize a
stock dividend. Which of the following is not a reason for a stock dividend?
 
To reduce the par value of the stock
   
Bryce, Inc. declared a 50% stock dividend on March 15, when there were 1,000
shares of $1 par value stock issued and outstanding, and the market value was $5.
The entry to record the declaration will include (debit/credit)_______ to the
Retained Earnings account, in the amount of _______.
 
debit; $500
   
Franz Inc. declared a 50% stock dividend when there were 10,000 shares of $1 par
value stock issued and outstanding, and the market value was $5 per share.
On the date of payment, the entry to record distribution of stock will
include a (debit/credit) ______ to the common stock dividend distributable
account, in the amount of $_____.
 
debit; 5,000
   
A stock dividend that is greater than 25% of the previously outstanding
shares of stock is considered to be a (small/large) stock dividend.
 
large
   
A stock __________ is the distribution of additional shares to
stockholders according to their percent ownership. When this occurs, the
corporation "calls in" its outstanding shares and issues more than one
new share in exchange for each old share.
 
split
   
A corporation can pay a brokerage house to issue its stock. Some brokerage houses underwrite
an indirect issuance of stock; they buy the stock from the corporation and resale it to investors.
 
True
   
_____ value stock is no-par stock to which the directors assigned a certain value per
share. This value becomes the minimum legal capital per share in this case.
 
Stated
   
The market value per share is the price at which stock is bought and
sold. Which of the following factors does not influence market value?
 
Par value
   
_________ has/have special rights that give it priority over other types of stock in one or more areas.
 
Preferred stock
   
On May 25, Tyler, Inc. issues 100 shares of $10 par value preferred stock for $5,000 cash.
The entry to record this transaction would include a (debit/credit) ________ to the preferred
stock account in the amount of _______.
 
credit; $1,000
   
Mario, Inc. declares a 2-for-1 stock . This means that Mario will "call in" its outstanding shares
and issue two shares in exchange for each old share of stock.
 
Split
   
Rank the following groups in order of authority - with the highest authority at the top.
 
1. Stockholders
2. Board of directors
3. President, vice president, and other officers
4. Employees
   
Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock
at its initial offering for $5 per share. The journal entry to record this transaction will include
a (debit/credit) _______ to Common Stock for ______.
 
credit; $500
   
A _____ on stock occurs when a corporation issues its stock for more than par (or stated) value.
 
premium
   
Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share.
Vanya sells 50 shares of stock at its initial offering for $10 per share. The journal entry
to record this transaction will include which of the following entries? (Check all that apply.)
 
Credit to Common Stock for $50.
Debit to Cash for $500.
Credit to Paid-In Capital, in Excess of Stated Value for $450.
   
Payton, Inc.'s charter authorized 100,000 shares of stock with a par value of $1 per share.
Payton issues 100 shares at a market value of $5 per share. The journal entry to record
this transaction will include a credit to _____ in the amount of _______.
 
Common Stock, $1 par; $100
   
John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100
shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as
a credit to which of the following accounts? (Check all that apply.)
 
Paid-in Capital in Excess of Par Value
Common Stock
   
Corporations can be separated into two types. A held corporation does not offer its stock for public sale and usually has few stockholders. A held corporation offers its stock for public sale and can have thousands of stockholders.
 
privately, closely, or private
   
Which of the following is not a characteristic of a corporation?
 
Unlimited liability of stockholders
   
Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.
 
True
   
J. Flores owns a business and is trying to decide whether to incorporate.
While researching corporations, she has determined the following facts.
Which of these facts is not correct?
 
Corporations dissolve when owners transfer rights.
   
Identify the advantages of the corporate form of business. (Check all that apply.)
 
Limited liability of stockholders
Ease of capital accumulation
Continuous life
   
Two of the biggest disadvantages of the corporate form of business are government regulation and corporate
 
taxation, taxes, tax, or double taxation
   
Identify which of the following is not generally a right of common stockholders.
 
Manage operations
   
A corporation sometimes issues a _____ as proof of share ownership.
 
stock certificate
   
A(n) keeps stockholder records and prepares official lists of stockholders for stockholder meetings and dividend payments.
 
registrar
   
Organization expenses, or the costs to organize a corporation, include which of the following? (Check all that apply.)
 
Legal fees
Charter fees
   
_____________ is a general term that refers to any shares issued to obtain capital (owner financing).
 
Capital stock
   
A is a document that gives a designated agent the right to vote the stock.
 
proxy
   
_________ stock is the number of shares that a corporation's charter allows it to sell.
 
Authorized
   
Stockholders have the right to at stockholders' meeting
 
vote
   
A corporation can sell directly or indirectly (through a brokerage).
 
stock
   
Investors who buy a corporation's stock sometimes receive a stock as proof of share ownership.
 
certificate
   
The board of directors authorizes a cash or distribution of cash to its investors.
 
dividend
   
Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie Inc. sells 100 shares of stock
at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit)
to Common Stock, for $(500/50).
 
credit
500
   
Authorizing a cash dividend payment to investors requires three crucial
dates. Identify which of the following is not a correct term to describe
these dates.
 
Date of authorization
   
On June 1, the board of directors of Dylan, Inc. declare a cash dividend of $1 per share.
On June 1, there are 1,000 shares of stock issued and outstanding. The journal entry required
on the date of declaration will include a (debit/credit) to the Common Dividend Payable account.
 
Credit
   
Visor, Inc. had net income during the period of $10,000. Preferred dividends were $2,000 and the
weighted-average common shares outstanding were 500. Basic earnings per share equal $________.
 
16
   
A corporation can purchase its own stock and retire it. Retiring stock reduced the number of ________ shares.
issued
   
Crystal, Inc. has 500 shares of outstanding $10 par common stock, with a current market value of
$20 per share. Earnings per share is $2.00. The price-earnings ratio is ___________.
 
10
   
Ace, Inc.'s stockholders' equity applicable to preferred shares is $60,000.
The number of common shares outstanding is 1,000 and the number of preferred shares
outstanding is 500. The current market value for common stock is $80 per share and preferred
stock is $95 per share. The book value per common share is $_______.
 
60
   
Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares
of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a
(debit/credit) to Common Stock, $(500/50).
 
credit
500
   
When a corporation declares and pays a cash dividend, there are three notable important dates.
Which date does not require a formal journal entry to the financial statements?
 
Date of record
   
The board of directors of Chester, Inc. authorizes a $0.10 cash dividend
to its 10,000 shares of common stock issued and outstanding. On the date
of payment, a journal entry will debit which of the following accounts
and for what amount?
 
Common Dividend Payable for $1,000.
   
A _________ is the distribution of cash to its owners. This is determined by the board of directors.
 
cash dividend
   
A _______ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.
 
stock
   
When the board of directors authorizes a cash dividend to investors, there are three important dates involved—the date of declaration, date of record, and date of
 
payment
   
Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200
shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to
record this transaction in the books of Damian, Inc., will include a credit to _________ in the
amount of _______.
 
Paid-in Capital, in Excess of Par; $8,000
   
Preferred stock usually carries a preference for dividends, meaning that: dividends are allocated
to preferred shareholders before they are issued
 
to common shareholders
   
Which of the following statements is false regarding stock splits?
Stock splits increase retained earnings.
   
(Cumulative/noncumulative) preferred stockholders have a right to be paid both the current and
all prior periods' unpaid dividends before any dividend is paid to common stockholders.
 
Cumulative
   
Stock that typically includes preference for receiving dividends and for distribution of corporate
assets during a liquidation is called _ stock.
 
preferred
   
Mario Hernandez owns 25 shares of $100 par, 5% cumulative preferred stock. During the current  
year, no dividends are declared or paid. The unpaid amount of $ is considered dividends in
 
125
arrears
   
On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash.
The entry to record this transaction would include a (debit/credit) to the preferred stock account in the
amount of $(100/10).
 
credit
100
   
__________ preferred stock confers no right to prior period unpaid dividends.
 
Noncumulative
   
An advantage of purchasing preferred stock is that preferred shareholders are guaranteed to receive
dividend payments each year.
 
False
   
Blink, Inc. has 1,000 shares of $10 par, 5% preferred stock, and 20,000 shares of $10 par common
stock issued and outstanding. If the board of directors authorizes a $20,000 dividend, the payment to common shareholders will total $
 
19,500
   
The ______ value per share is the price at which a stock is bought and sold.
 
market
   
A(n) agent assists with purchases and sales of shares by receiving and issuing certificates as necessary.
 
Transfer
   
When all authorized shares of stock have the same rights and characteristics, the stock is called _______ stock.
 
common
   
Capital is a general term that refers to any shares issued to obtain capital (owner financing).
 
stock
   
Jordan Inc.'s charter states that there are 50,000 shares of stock authorized with a par value of $5 per share.
This typically means that investors must pay a (minimum/maximum) of $5 per share to invest in the corporation.
 
minimum
   
The _____ value of stock is an amount assigned per share by the corporation in its charter. In many states,
this amount establishes the minimum legal capital, which refers to the least amount that the buyers of
stock must contribute or be subject to paying at future dates.
 
par
   
Martin, Inc.'s charter authorizes 50,000 shares of stock with a par value of $1 per share. 1,000 shares
of stock are issued at a market value of $5 per share. This means that the shares of stock are issued at a
(premium/discount)
 
premium
   
On March 15, the board of directors of Richmond, Inc. declare a cash dividend of $1
per share. On March 15, there are 1,000 shares of stock issued and outstanding.
The journal entry required on the date of declaration will include a debit to the _________ account.
 
Retained Earnings
   
Carefree, Inc. has 20,000 shares issued and outstanding. On August 1, the board authorizes
a 20% stock dividend. This is considered a (large/small) stock dividend.
 
small
   
A corporation has agreed to pay a $0.10 cash dividend on shares of common stock.
On the date of record, no formal journal entry is required.
 
True
   
On January 1, Lang, Inc. has 100,000 shares of stock issued and outstanding. The board of directors of
Lang wants to authorize a large stock dividend. This means that they must authorize a stock dividend
of at least ______ shares of stock.
 
25,001
   
Peas, Inc. has 1,000 shares of $5 par value common stock outstanding. The annual cash dividend
per share was $6.00; market value per share was $30; and net income during the period was $65,000.
Dividend yield equals ________%.
 
20
   
Maria Simmons owns 100 shares of $10 par, 5% participating preferred stock.
Which of the following statements is true?
 
Maria will be entitled to $50 and may receive additional dividends.
   
The board of directors of Anchor, Inc. authorizes a $0.50 cash dividend to its 100,000 shares of common stock
issued and outstanding. On the date of payment, a journal entry will include which of the following accounts?
(Check all that apply.)
 
Credit to Cash
Debit to Common Dividend Payable
   
On June 1, the board of directors of Big, Inc. declare a 20% stock dividend. On this date, there were 10,000
shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to
record this transaction would include a (debit/credit) to Retained Earnings in the amount of $.
 
debit
10,000
   
The board of directors of Visor, Inc. authorize a _________, a distribution of additional shares of the
corporation's own stock, to existing shareholders.
 
stock dividend
   
A stock dividend that is greater than 25% of the previously outstanding
shares of stock is considered to be a (small/large) stock dividend.
large
   
Keys, Inc. purchased 100 shares of its own common stock for $10 per share. The stock is now classified
as ________ stock, a contra equity account, reported on the statement of stockholder's equity.
 
Treasury
   
Zion, Inc. decalres a 10% stock dividend when there are 10,000 shares of $1 par value stock issued
and outstanding and the market value is $5 per share. On the date of payment, Zion will issue the
stock and record the transaction with which of the following entries?
 
Debit to Common Stock Dividend Distributable for $1,000.
Credit to Common Stock for $1,000
   
A ________ dividend, declared by a corporation's directors, is a distribution of additional shares of
the corporation's own stock.
 
stock
   
Vernon, Inc.'s charter did not assign a par-value to its authorized stock. However, Vernon's directors
assigned a(n) ________ value per share. This value becomes the minimum legal capital per share in this case.
 
stated
   
Rush, Inc.'s charter authorized 500,000 shares of stock with a par value of $1 per share. Rush issues
10 shares at a market value of $10 per share. The journal entry to record this transaction will include
a (debit/credit) to the Common Stock, $1 par account in the amount of $.
credit
 
10 or $10
   
A _________ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders.
These entities can be privately or publicly held.
corporation
   
 
   
Stockholders' equity, reported on the balance sheet, consists of which of the following accounts?
Paid-In Capital
Retained Earnings
   
Philip's Inc. reports stockholders' equity on its financial statements. The two items reported in the
stockholders' equity section of Philip's balance sheet are Capital and Retained Earnings.
 
Paid-in or Contributed
   
A on stock occurs when a corporation issues its stock for less than par (or stated) value; however, most
states prohibit stock to be sold for less than the par (or stated) value.
 
discount
   
Niren, Inc.'s charter authorizes 1,000,000 shares of stock at a par value of $1 per share. Niren sells 100
shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include
a (debit/credit) to Common Stock, $1 par for $.
 
credit
100 or $100
   
On January 1, the board of directors of Shante, Inc. declared a 10% stock dividend. On this date,
there were 10,000 shares of $1 par value stock issued and outstanding and the market value was
$5 per share. The entry to record this transaction would include a debit to _____ in the amount of ______.
 
Retained Earnings; $5,000
   
To record a stock split, debit Retained Earnings and credit Common Stock.
 
False
   
On January 1, the board of directors of Zion, Inc. declare a 10% stock dividend. On this date,
there were 10,000 shares of $1 par value stock issued and outstanding  and the market value was
$5 per share. On March 15, the date of payment, Zion  issued the stock. The entry necessary on
March 15 would include a (credit/debit)  ______ to Common Stock Dividends distributable for ______.
 
debit; $1,000
   
Carin, Inc. declared a 50% stock dividend on January 15, when there were 10,000 shares of $1 par
value stock issued and outstanding, and the market value was $20. The entry to record the declaration
will include debit to the _______ account, in the amount of _______. _________ has/have special rights
that give it priority over other types
 
of stock in one or more areas.
   
_______ preferred stockholders have a right to be paid both the current and all prior periods' unpaid
dividends before any dividend is paid to common stockholders.
 
Cumulative
   
When a corporation purchases shares of its own stock, it is called ________ stock.
 
treasury
   
When stock is cumulative preferred stock and the board of directors does not declare a dividend,
the unpaid dividend amount is called:
 
dividend in arrears.
   
Treasury stock is a(n) equity account, with a normal debit balance. It is reported on the stockholders'
equity section of the balance sheet as a reduction to stockholders' equity.
 
contra
   
Roger Hillcrest owns 100 shares of $10 par, 5% noncumulative preferred stock. During the current year,
 there are no dividends declared or paid. If there is a large cash dividend paid in the following year,
Roger would be entitled to up to $ for the previous year before common shareholders are paid.
 
0
   
Stockholders' equity, reported on the balance sheet, consists of which of the following accounts?
(Check all that apply.)
 
Retained Earnings
Paid-in Capital
   
Darby, Inc. has 25,000 shares of stock issued and outstanding. All the shares of stock have the same
rights and characteristics; therefore, the stock is called stock.
 
common
   
Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200
shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include
which of the following entries? (Check all that apply.)
 
Debit to Cash for $200.
Credit to Common Stock, $1 par for $200.

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2