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

Yates Corporation has the following stockholders' equity accounts on January 1, 2018: The company uses the cost method to account for treasury stock transactions. During 2018, the following treasury stock transactions occurred: April 1 Purchased 10,000 shares at $19 per share. August 1 Sold 4,000 shares at $22 per share. October 1 Sold 2,000 shares at $15 per share. Instructions (a) Journalize the treasury stock transactions for 2018. (b) Prepare the Stockholders' Equity section of the balance sheet for Yates Corporation at December 31, 2018. Assume net income was $110,000 for 2018.

The par value of a stock

A large stock dividend and stock split can frequently have the same effect on the market price of a corporation's stock. Explain how stock dividends and stock splits affect the market price of a corporation's stock.

The amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified.

The per share amount normally assigned by the board of directors to a large stock dividend is

Three dates are important in connection with cash dividends. Identify these dates, and explain their significance to the corporation and its stockholders.

The following selected transactions pertain to Sinclair Corporation: Jan. 3 Issued 100,000 shares, $5 par value, common stock for $25 per share. Feb. 10 Issued 6,000 shares, $5 par value, common stock in exchange for special purpose equipment. Sinclair Corporation's common stock has been actively traded on the stock exchange at $30 per share. Instructions Journalize the transactions.

Identify (by letter) each of the following characteristics as being an advantage, a disadvantage, or not applicable to the corporate form of business organization. A = Advantage D = Disadvantage N = Not Applicable Characteristics 1. Separate legal entity 2. Taxable entity resulting in additional taxes 3. Continuous life 4. Unlimited liability of owners 5. Government regulation 6. Separation of ownership and management 7. Ability to acquire capital 8. Ease of transfer of ownership

The concept of an "artificial being" refers to which form of business organization?

Jason Thomas has invested $200,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Thomas stand to lose?

Identify the effect the declaration and distribution of a stock dividend has on the par value per share. Par Value per Share

A separate paid-in capital account is used to record each of the following except the issuance of

Treasury stock is

Additional paid-in capital includes all of the following except the amounts paid in

Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.

Each of the following decreases retained earnings except a

Morgan Company reported the following balances at December 31, 2017: common stock $500,000; paid-in capital in excess of par value $100,000; retained earnings $350,000. During 2018, the following transactions affected stockholders' equity. 1. Issued preferred stock with a par value of $150,000 for $200,000. 2. Purchased treasury stock (common) for $50,000. 3. Earned net income of $140,000. 4. Declared and paid cash dividends of $75,000. Instructions Prepare the stockholders' equity section of Morgan Company's December 31, 2018, balance sheet.

A statement of stockholders' equity discloses all of the following except:

On September 5, Borton Corporation acquired 2,500 shares of its own $1 par common stock for $22 per share. On October 15, 1,000 shares of the treasury stock is sold for $25 per share. Instructions Journalize the purchase and sale of the treasury stock assuming that the company uses the cost method.

Dividends in arrears on cumulative preferred stock