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Exam 13: Corporations: Organization and Capital Stock Transactions

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Question 41

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Kaenzig Coffee Company issued 1000 shares of no-par common stock for $11000. Which of the following journal entries would be made if the stock has a stated value of $2 per share? a. $\begin{array}{llr} \text {Cash } &11,000\\ \text { Common Stock} &&11,000\\\end{array}$ b. $\begin{array}{llr} \text { Cash } &11,000\\ \text { Common Stock} &&2,000\\ \text { Paid-in Capital in Excess of Par} &&9,000\end{array}$ c. $\begin{array}{llr} \text {Cash } &11,000\\ \text { Common Stock } &2,000\\ \text { Paid-in Capital in Excess of Stated Value } &9,000\end{array}$ d. $\begin{array}{llr} \text { Common Stock} &11,000\\ \text { Cash} &&11,000\\\end{array}$

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Question 42

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The par value of stock issued for noncash assets is never a factor in determining the cost of the assets received.

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B) False

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Question 43

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The two ways that a corporation can be classified by ownership are

Two classifications appearing in the paid-in capital section of the balance sheet are

Stock can be issued only in exchange for cash.

Katy Hooper Inc. issued 6000 shares of no-par common stock with a stated value of $5 per share. The market price of the stock on the date of issuance was $14 per share. The entry to record this transaction includes a

In its first year of operations Banner Elk Corporation had the following transactions pertaining to its $10 par value preferred stock. Feb. 1 $\quad$ Issued 6,000 shares for cash at $\$ 43$ per share. Nov. 1 $\quad$ Issued 3,000 shares for cash at $\$ 45$ per share. Instructions (a) Journalize the transactions. (b) Indicate the amount to be reported for (1) preferred stock and (2) paid-in capital in excess of par - preferred stock at the end of the year.

Which of the following represents the largest number of common shares?

When a corporation has only one class of capital stock it is identified as preferred stock.

Rob Rote the president and CEO of RRR Waste Management was recently hospitalized suffering from exhaustion and a heart ailment. Immediately prior to his hospitalization RRR had experienced a sharp decline in its stock price and trading activity became almost nonexistent. The primary reason for this was concern expressed in the media over a new untested waste management system implemented by the company. Mr. Rote had been unwilling to submit the procedure to testing before implementation but he reluctantly agreed to limited tests after the system was operational. No problems have been identified by the tests to date. The other members of management called a meeting to determine what they should do. Randy Smith the marketing manager suggested that the company purchase a large number of shares of treasury stock. In that way investors might notice that activity had picked up and might decide to buy some more shares. This plan would use up most of the company's available cash so that there will be no money available for a cash dividend. RRR has paid cash dividends every quarter for over ten years. Required: 1. Is Mr. Smith's suggestion ethical? Explain. 2. Is it ethical to discontinue the cash dividend? Explain.

Owners' equity for a corporation is identified as each of the following except

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

In published annual reports subdivisions within the stockholders' equity section are seldom presented but additional information is frequently included in the footnotes to the financial statements.

In the stockholders' equity section of the balance sheet the classification of capital stock consists of

The par value of common stock must always be equal to its market value on the date the stock is issued.

H. Tillman performed legal services for J. Laney. Due to a cash shortage an agreement was reached whereby J. Laney. would pay H. Tillman a legal fee of approximately $4000 by issuing 1000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $4.50 per share. Given this information the journal entry for J. Laney. to record this transaction is: a. $\begin{array}{llr} \text { Legal Expense} &4,500\\ \text {Common Stock } &&4,500\\\end{array}$ b. $\begin{array}{llr} \text {Legal Expense } &4,000\\ \text { Common Stock } &&4,000\\\end{array}$ c. $\begin{array}{llr} \text { Legal Expense} &4,000\\ \text {Common Stock } &&1,000\\ \text { Paid-in Capital in Excess of Par - Common } &&3,000\end{array}$ d. \begin{array}{llr} \text {Legal Expense } &4,500\\ \text { Common Stock } &&1,000\\ \text {Paid-in Capital in Excess of \mathrm{Par} - Common } &&3,500\end{array}

Rubio Corporation began business by issuing 300000 shares of $5 par value common stock for $25 per share. During its first year the corporation sustained a net loss of $50000. The year-end balance sheet would show

If a corporation has only one class of stock it is referred to as

Slater Roofing Company originally issued 6000 shares of $10 par value common stock for $180000 ($30 per share) . Slater subsequently purchases 600 shares of treasury stock for $27 per share and resells the 600 shares of treasury stock for $29 per share. In the entry to record the sale of the treasury stock there will be a

The following data is available for Santos Service Corporation at December 31 2017: Common stock, par $\$ 10$ (authorized 100,000 shares) $\quad$ $\$ 400,000$ Treasury Stock (at cost $\$ 15$ per share) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\$27,000$ Based on the data how many shares of common stock are outstanding?