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Exam 11: Proprietorships, Partnerships, and Corporations

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Question 1

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Preferred stockholders' claims to a corporation's assets take precedence over the claims of some creditors.

A) True
B) False

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Question 2

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What is a reason that a corporation might choose to "split" its stock?. _____ a)Double taxation refers to the fact that both a partnership and its partners must pay income tax on the earnings of the partnership. _____ b)A sole proprietorship is an accounting entity separate from its owner. _____ c)Limited liability is a benefit to corporations and to sole proprietorships. _____ d)A corporation's life continues when a shareholder dies or sells his or her stock. _____ e)Sole proprietorships are, generally, subject to fewer governmental regulations than corporations.

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Stock prices for the market as a whole t...

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Question 3

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Treasury Stock is reported on the balance sheet between the liabilities and stockholders' equity sections.

On June 10, Year 1, Burton Builders, Incorporated, a publicly traded company, announced that it had been awarded a contract to build a football stadium at a contract price of $500 million. This contract would increase its projected revenues by 20% over the next three years. Which of the following statements is correct with regard to this announcement?

Which of the following is a disadvantage of a sole proprietorship?

A high price-earnings ratio generally means that investors are optimistic about a company's future growth.

What is treasury stock?

Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships, and corporations.

Fixit Corporation issued 20,000 shares of $20 par value common stock at its current market price of $32. How does this event affect total stockholders' equity?

Treasury Stock is a contra equity account..

Loudoun Corporation's balance sheet reflected the following information: The stock listed on the balance sheet was issued in a single transaction. Required: What was the issue price per share of the stock?

Montana Company was authorized to issue 200,000 shares of common stock. The company had issued 50,000 shares of stock when it purchased 10,000 shares of treasury stock. After the purchase of treasury stock, the number of outstanding shares of common stock was which of the following?

Indicate how each event affects thefinancial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA.You do not need to enter dollar amounts On January 1, Year 1, Craig Corporation began operations by issuing 5,000 shares of $6 par value stock at $12.

Indicate how each event affects thefinancial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA.You do not need to enter dollar amounts Atlantic Oil Company had 10,000,000 common shares outstanding. The shares had been issued at $14 per share. The stock of Atlantic Oil Co. was trading at $14 per share on March 27 when the company announced that it had recently discovered a large oil reserve. The market value of the company's stock immediately went up to $28 per share.

Indicate how each event affects thefinancial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA.You do not need to enter dollar amounts The board of directors of Moreno Company restricts the amount of retained earnings available to pay dividends.

Seymore Corporation has the following number of shares of stock outstanding:. _____ a)Preferred stockholders will receive $16,000 of cash dividends in the current year. _____ b)After all required preferred dividends are paid, preferred and common stockholders will share the remaining dividend. _____ c)Common stockholders will receive $48,000 of cash dividend in the current year. _____ d)The amount of common dividends per share that stockholders will receive in the current year is $6.40. _____ e)After the $80,000 dividend is paid, the amount of dividends in arrears equals zero.

What is meant by the term "double taxation"?

The most commonly reported measure of a company's value is earnings per share.

On September 1, Year 1, Orville Corporation has unappropriated retained earnings of $600,000, appropriated retained earnings of $400,000, cash of $850,000, and accounts payable of $50,000. What is the maximum amount that can be used for cash dividends?

Chadwick Associates retained $850,000 of net income in the business in Year 1. If $75,000 was appropriated to satisfy the restrictive covenant of a loan agreement, what are the effects of the appropriation on the financial statements?