Exam 11: Corporations: Organization, Stock Transactions, and Stockholders Equity

Companies frequently issue both preferred stock and common stock. What are the major differences in the rights of stockholders between these two classes of stock?

Identify at least six characteristics of the corporate form of business organization. Contrast each one with the partnership form of organization.

Reserves include each of the following except

A net loss

What is ordinarily the first step in the formation of a corporation?

Halpern Corporation is authorized to issue 1,000,000 shares of $3 par value common stock. During 2018, its first year of operation, the company has the following stock transactions. Jan. 1 Paid the state $5,000 for incorporation fees. Jan. 15 Issued 500,000 shares of stock at $6 per share. Jan. 30 Attorneys for the company accepted 500 shares of common stock as payment for legal services rendered in helping the company incorporate. The legal services are estimated to have a value of $7,000. July 2 Issued 100,000 shares of stock for land. The land had an asking price of $900,000. The stock is currently selling on a national exchange at $8 per share. Sept. 5 Purchased 15,000 shares of common stock for the treasury at $8 per share. Dec. 6 Sold 11,000 shares of the treasury stock at $11 per share. Instructions Journalize the transactions for Halpern Corporation.

The purchase of treasury stock

In the stockholders' equity section of the balance sheet,

Salon Company originally issued 4,000 shares of $10 par value common stock for $120,000 ($30 per share). Salon subsequently purchases 400 shares of treasury stock for $27 per share and resells the 400 shares of treasury stock for $29 per share. In the entry to record the sale of the treasury stock, there will be a

Which of the following is not a right or preference associated with preferred stock?

The stockholders' equity section of Maria Corporation at December 31, 2017, included the following: 6% preferred stock, $100 par value, cumulative, 10,000 shares authorized, 8,000 shares issued and outstanding $ 800,000 Common stock, $10 par value, 250,000 shares authorized, 200,000 shares issued and outstanding $2,000,000 Dividends were not declared on the preferred stock in 2017 and are in arrears. On September 15, 2018, the board of directors of Maria Corporation declared dividends on the preferred stock for 2017 and 2018, to stockholders of record on October 1, 2018, payable on October 15, 2018. On November 1, 2018, the board of directors declared a $.50 per share dividend on the common stock, payable November 30, 2018, to stockholders of record on November 15, 2018. Instructions Prepare the journal entries that should be made by Maria Corporation on the dates indicated below:

The following accounts appear in the ledger of Fall Inc. after the books are closed at December 31, 2018. Common Stock, $1 par value, 500,000 shares authorized, 400,000 shares Instructions Prepare the stockholders' equity section at December 31, 2018, assuming that retained earnings is restricted for plant expansion in the amount of $200,000.

On the dividend record date,

A corporation must be incorporated in each state in which it does business.

Outstanding stock of the Zone Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 6%, $10 par noncumulative preferred stock. In 2017, Zone declared and paid dividends of $2,000. In 2018, Zone declared and paid dividends of $6,000. How much of the 2018 dividend was distributed to preferred shareholders?

Library, Inc. has 2,500 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2018. The board of directors declared and paid a $3,000 dividend in 2017. In 2018, $18,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2018?

Desert Corporation has the following capital stock outstanding at December 31, 2018: The preferred stock was issued at $130 per share. The common stock was issued at an average per share price of $14. Instructions Prepare the paid-in capital section of the balance sheet at December 31, 2018.

The retained earnings statement

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

If Vickers Company issues 5,000 shares of $5 par value common stock for $175,000,