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Exam 13: Accounting for Corporations

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Question 41

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If the dividends account is not recorded as a reduction to Retained Earnings on the date of declaration,the dividends account is closed to Retained Earnings at the end of the accounting period.

A) True
B) False

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Question 42

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A stock dividend decreases the market price of the company's stock.

A) True
B) False

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Question 43

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A corporation is a legal entity separate from its owners.

A company made an error in recording the 2009 purchase of computer equipment as an expense.This was discovered in 2011.The item should be reported as a prior period adjustment on the 2009 income statement.

A company reported $990,000 in net income for the current year.Total weighted-average number of common shares outstanding are 150,000 shares,and the year-end market price is $79.20 per common share.Calculate the company's price earnings ratio.

The number of shares that a corporation's charter allows it to sell is referred to as:

A company paid a cash dividend of $0.44 per share during the current year,and reported 18,000 shares of common stock issued,and 2,000 common shares in treasury stock during the current year.The year-end market price per share was $27.50.Calculate the following: (1)total amount of cash dividends paid to common shareholders,and (2)dividend yield.

The board of directors of a corporation:

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

A preemptive right means shareholders can purchase their proportional share of common stock issued later by the corporation.

A company reported net income of $850,000 for the current year.The year-end market price per common share was $12 and there were 425,000 weighted-average shares of common stock outstanding.Calculate the company's price-earnings ratio.

Treasury stock is stock that has been authorized,issued,and is outstanding.

The Discount on Common Stock account reflects:

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

Explain where each of the following items should appear in the financial statements of a corporation: (1)The accounting department discovered that an entry was made last year to Prepaid Insurance instead of to Insurance Expense.The after-tax effect of the charge to Prepaid Insurance was $11,000. (2)The company grants five of its employees the option to purchase 100 shares of its $5 par value common stock at its current market price of $20 per share anytime with the next five years.None of the employees exercised the options in the current year.

A company declared a $0.55 per share cash dividend.The company has 200,000 shares authorized,190,000 shares issued,and 8,000 shares in treasury stock.The journal entry to record the dividend declaration is:

On January 10,a corporation purchased 5,000 shares of its own common stock at $17.50 per share.On August 4,a total of 1,000 treasury shares were sold at $19.00 per share.These are the only treasury stock transactions ever made by the corporation.Prepare the journal entries required on January 10 and August 4.

Given the following information about a corporation's current year activities,compute the retained earnings for the current year.

Preferred stock which confers no right to prior periods' unpaid dividends if they were not declared is called:

When preferred stock is cumulative and the directors either do not declare a dividend to preferred stockholders or declare one that does not cover the total amount of cumulative dividends,the unpaid amount is called ____________________________.