Exam 11: Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Which of the following is not true of a corporation?

Ralston Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ralston issues 9,000 shares of common stock to pay its recent attorney's bill of $37,500 for legal services on a land access dispute, which of the following would be the journal entry for Ralston to record? a. Legal Expense 9,000 Common Stock 9,000 b. Legal Expense 37,500 Common Stock 37,500 c. Legal Expense 37,500 Common Stock 9,000 Paid-in Capital in Excess of Stated Value - Common 28,500 d. Legal Expense 37,500 Common Stock 9,000 Paid-in Capital in Excess of Par - Preferred 28,500

Dividends in arrears on cumulative preferred stock are considered a liability.

At December 31, the stockholders' equity of Smith Company was as follow: Common stock, $5 par value: 1,100,000 shares issued and 1,000,000 shares outstanding \ 5,500,000 Additional paid-in capital 1,400,000 Retained earnings 1,500,000 Treasury stock, (100,000 shares) Total stockholders' equity The book value per share of common stock is

Which of the following is not a significant date with respect to dividends?

A credit balance in retained earnings represents

Ranier Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ranier issues 5,000 shares of preferred stock for land with an asking price of $575,000 and a market value of $550,000, which of the following would be the journal entry for Ranier to record? a. Legal Expense 37,500 Common Stock 9,000 Paid-in Capital in Excess of Par - Preferred 28,500 b. Land 500,000 Preferred Stock 500,000 c. Land 575,000 Preferred Stock 500,000 Paid-in Canital in Excess of Par-Preferred 75.000 d. Land 550,000 Preferred Stock 500,000 Paid-in Capital Excess of Par-Preferred 50,000

Which one of the following is not necessary in order for a corporation to pay a cash dividend?

Retained earnings are occasionally restricted

If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to

Which one of the following would not be considered an advantage of the corporate form of organization?

Dividends Payable is classified as a

New Corp. issues 2,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, credits are made to

Each of the following is correct regarding treasury stock except that it has been

The acquisition of treasury stock by a corporation increases total assets and total stockholders' equity.

The return on common stockholders' equity is computed by dividing net income available to common stockholders by

Treasury stock is

The ability of a corporation to obtain capital is

Preferred stockholders generally do not have the right to vote for the board of directors.

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