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Exam 13: Accounting for Corporations

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Question 81

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Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

A) Financial leverage.
B) Discount on stock.
C) Premium on stock.
D) Preemptive right.
E) Capital gain.

F) A) and C)
G) A) and B)

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Question 82

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Boron Company is authorized to issue 50,000 shares of $50 par value,8%,cumulative,fully participating preferred stock,and 750,000 shares of $5 par value common stock.Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:

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Question 83

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

Special rights often granted to preferred stock include a preference for receiving dividends and additional voting privileges.

Alto Company issued 7% preferred stock with a $100 par value.This means that:

Changes in retained earnings are commonly reported in the:

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

Ultimate Sportswear has $100,000 of 8% noncumulative,nonparticipating,preferred stock outstanding.Ultimate Sportswear also has $500,000 of common stock outstanding.In the company's first year of operation,no dividends were paid.During the second year,the company paid cash dividends of $30,000.This dividend should be distributed as follows:

The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:

Stocks that pay relatively large cash dividends on a regular basis are called:

Stocks with a price-earnings ratio less than 20 to 25 are likely to be overpriced.

Corporations avoid many of the state regulations and controls that proprietorships and partnerships are subject to.

Record the following transactions of Naches Corporation in general journal form: (a)Reacquired 8,000 of its own $3 par value common stock at $20 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 $23 cash per share. (c)Sold 3,000 shares of the stock reacquired under part (a)at $19 cash per share.

A company made an error in calculating and reporting amortization expense in 2015.The error was discovered in 2016.The item should be reported as a prior period adjustment:

Callable preferred stock gives a corporation the option of exchanging preferred shares into common shares at a specified rate.

Torino Company has 10,000 shares of $5 par value,4% cumulative and nonparticipating preferred stock and 100,000 shares of $10 par value common stock outstanding.The company paid total cash dividends of $1,000 in its first year of operation.The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

If a company resells treasury stock below the acquisition cost,a loss from the sale of treasury stock is recorded.

A reverse stock split increases the market value per share and the par value per share of stock.

A company had a beginning balance in retained earnings of $430,000.It had net income of $60,000 and paid out cash dividends of $56,250 in the current period.The ending balance in retained earnings equals:

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding.The journal entry to record the payment of the cash dividend is: