Exam 5: Introduction to Corporations

Jogger Inc. is a private corporation reporting under ASPE. At December 31, 2021, its adjusted trial balance contained the following summary data: Additional information: 1. In 2021 dividends of $ 30,000 were declared on March 31, June 30, September 30 and December 31 respectively. The dividends were paid on April 9, 2021, July 10, 2021, October 4, 2021 and January 12, 2022 respectively. 2. The company's tax rate is 25%. Instructions a) Determine the income tax expense and prepare a multi-step income statement for 2021. b) Prepare a statement of retained earnings for 2021.

ABC Industries has the following account balances: Assume an income tax rate of 20%. What is the amount of income tax expense to be reported on the corporate income statement?

Preferred shares issued with the right of the shareholder to redeem the shares are referred to as

Dividends in arrears on cumulative preferred shares

Shareholders of a corporation directly elect

In its first year of operations, Snake Corporation had the following transactions relating to its convertible preferred shares and common shares. The preferred dividend rate is $ 2 per share. Jan 1 Issued 10,000 common shares at $ 10 per share. Feb 1 Issued 3,000 preferred shares for $ 41 per share. Jul 1 Declared and paid annual preferred dividends. Nov 1 Converted 1,000 preferred shares to common shares when the market value of the preferred shares was $ 42 and the market value of the common shares was $ 20. One share of preferred is convertible to 10 common shares. Instructions a) Journalize the transactions. b) Indicate the amount to be reported for (1) preferred shares and (2) common shares at the end of the year.

KBR Investments Inc. has issued 90,000 Class A $ 3 cumulative preferred shares and 45,000 Class B $ 5 noncumulative preferred shares. At the end of 2019, there were no dividends in arrears. During 2020, KBR paid dividends of $ 100,000 to its Class A shareholders. In January of 2021, KBR paid dividends of $ 120,000 to its Class A shareholders. On December 31, 2021, KBR declared dividends in an amount sufficient to pay out all of the remaining dividends in arrears plus the entire current year obligation including dividends on Class B shares, so that they can pay dividends on common shares. Instructions Calculate the dividends declared for Class A and for Class B shareholders on December 31, 2021.

Assume that Company A is doing quite well and has healthy cash flows from operating activities. Its board of directors has decided to NOT pay any dividends to its shareholders for the foreseeable future. This is most likely because

Corporations must pay taxes as a legal entity.

A distribution of a corporation's profit to its shareholders is referred to as

Dividends in arrears on cumulative preferred shares

A company may NOT declare a dividend if there was a loss in the year.

Byrne Corporation had the following accounts at January 1, 2021: During the year, the company paid the preferred dividend and paid a $ 1.50 dividend to the common shareholders. The company had profit of $ 333,000. Instructions Prepare the shareholders' equity section of the balance sheet at December 31, 2021.

Retained earnings are subtracted from share capital to arrive at total shareholders' equity.

Dividends in arrears are NOT considered a liability.

Norton Corporation has the following shareholders equity on September 30, 2021: On September 15, 2021, Norton Corporation declared a $ 170,000 dividend to be paid on October 15 to shareholders of record on September 30. Assuming there were no dividends in arrears, the total amount of the dividend paid to the preferred shareholders in 2021 would be

A credit balance in retained earnings represents

Income taxes only affect the income statement.

Austrian Limited is a private corporation reporting under ASPE. At December 31, 2021, its general ledger contained the following summary data: Additional information: 1. In 2021 dividends of $ 35,000 were declared on July 1 and December 31 respectively. The dividends were paid on August 10, 2021 and January 15, 2022 respectively. 2. The company's tax rate is 33%. Instructions a) Determine the income tax expense and prepare a multi-step income statement for 2021. b) Prepare a statement of retained earnings for 2021.

Which of the following is NOT considered a typical feature of preferred shares?