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Exam 11: Proprietorships, Partnerships, and Corporations

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Question 21

Multiple Choice

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Where is treasury stock reported on a corporation's balance sheet?

A) As an addition to total paid-in capital
B) As a deduction from total paid-in capital
C) As a deduction from total stockholders' equity, following Retained Earnings
D) As a deduction from Retained Earnings

E) B) and C)
F) A) and C)

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Question 22

Multiple Choice

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What is the correct journal entry to record this transaction?

A)
B)
C)
D)

E) C) and D)
F) None of the above

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Question 23

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On July 1, 2013, Village Bookstore, Inc. appropriated retained earnings in the amount of $18,000 for a future remodeling project in the basement of the bookstore. On June 30, 2013, the balance of Retained Earnings was $41,400 and the Cash balance was $21,600. Which of the following answers shows the effect of the July 1 transaction on the financial statements?

The number of shares of stock outstanding generally is greater than the number of shares of stock issued.

On June 10, 2013, Miller Builders, Inc., a publicly traded company, announced that it had been awarded a contract to build a super football stadium at a contract price of $500 million. This contract would increase its projected revenues by 25% over the next three years. Which of the following statements is correct in regards to this announcement?

Indicate whether each of the following statements about stockholders' equity is true or false. _____ a) The balance in the treasury stock account increases total stockholders' equity. _____ b) A company may acquire treasury stock in an effort to increase the market price of its stock. _____ c) The declaration and distribution of a stock dividend reduces retained earnings. _____ d) A 2-for-1 stock split probably will double the monetary value of each investor's holdings on the date the split takes effect. _____ e) If treasury stock that had been acquired by a company for $50 per share is resold for $60 per share, total assets and stockholders' equity will increase.

Jessup Corp. has 250,000 shares of common stock authorized. It has issued 85,000 shares and has reacquired 9,000 of these shares as treasury stock. Jessup subsequently declared a cash dividend of $5 per share. What is the total amount of dividends that were declared?

Which of the following statements is a reason why a company would buy treasury stock?

Preferred stockholders generally have no voting rights in a corporation.

A corporation is a legal entity created by the authority of a state government, separate and distinct from its owners.

The Creighton Company was started on January 1, 2013 as a sole proprietorship. The initial investment from Chris Creighton, the owner, was $160,000. During 2013, the business earned $120,000 in cash revenue and paid $80,000 in cash expenses. Mr. Creighton withdrew $8,000 for her personal use. Using the above information, prepare an income statement, a capital statement, and a balance sheet for the Creighton Company.

Chad Associates retained $825,000 of net income in the business in 2013. If $85,000 was appropriated to satisfy the restrictive covenant of a loan agreement, what are the financial statements effects of the appropriation?

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

Describe the varying degrees to which closely held corporations and publicly traded corporations are regulated.

A partner is responsible for his/her own actions and also for actions taken by another partner on behalf of the partnership.

An appropriation of retained earnings places a limit on the amount of dividends a corporation can declare.

The most frequently reported measure of a company's value is the return on assets ratio.

Show the effect of a stock dividend on the accounting equation.

At the end of the accounting period, Harris Company had $6,000 of par value common stock issued, additional paid in capital of $5,500, retained earnings of $6,000, and $2,000 of treasury stock. The total amount of stockholders' equity is:

Will the number of shares of stock issued and the number of shares of stock outstanding always be the same? Why or why not?