Exam 13: Introduction to Corporations

RD Holdings Ltd. which has authorized share capital of an unlimited number of common shares, and 1,000,000 preferred shares, had the following share transactions during 2014, its first year of operations: Jan 2 Issued 30,000 common shares at $0.10 each. Jan 5 Issued 50,000 common shares to Roy Daines in exchange for management services valued at $5,000. Jan. 31 Issued 1,000,000 common shares to Rachel Daines in exchange for merchandise inventory valued at $15,000, land valued at $30,000 and a building valued at $55,000. Mar 31 Issued 60,000 to Gilmore Law Firm in exchange for legal services. It is assumed that the market price of RD Holding's shares is unchanged since January 2. Dec 1 Issued 20,000 of $2 preferred shares for $20 per share. Instructions a. Record the 2014 share transactions. b. Prepare the share capital section of RD Holdings' balance sheet at December 31, 2014.

Hunter Corporation is authorized to issue 2,000,000, common shares. During its first three years of operation, Hunter issued 1,200,000 shares at $15 per share. In 2013, Hunter issued an additional 5,000 shares in return for equipment with a fair value of $75,000. The market price of the shares was $16 at the time of the sale. Instructions Based on the above information, answer the following questions: a. How many shares are authorized at the end of 2013? b. How many shares are issued at the end of 2013? c. What is the value of the Common Shares account at the end of 2013?

The two ways that a corporation can be classified by ownership are

Articles of incorporation form the corporation's "constitution".

Shareholders of a corporation directly elect

If convertible preferred shares are converted into common shares,

On January 1, 2014, Hobbs Corporation had 60,000 common shares issued at $1 per share. During the year, the following transactions occurred: Profit for 2014 amounted to $651,000. Instructions Prepare journal entries to record the above transactions.

Norton Corporation has the following shareholders equity on September 30, 2014: On September 15, 2014, Norton Corporation declared a $170,000 dividend to be paid on October 15 to shareholders of record on September 30. -Assuming that the preferred dividends have not been paid since 2011, the total amount of the dividend paid to the preferred shareholders in 2014 would be

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

The date on which a cash dividend becomes a binding legal obligation is on the

Income tax expense is based on

Cordoza Corporation had profit of $400,000 in 2014. Total shareholders' equity was $1,400,000 at December 31, 2012; $1,500,000 at December 31, 2013; and $1,600,000 at December 31, 2014. Instructions Calculate return on equity for 2014 and explain what it means.

One of the disadvantages of a corporation is that the company will have continuous life.

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

The term residual claim refers to a shareholder's right to

Profits may be either reinvested in a corporation or distributed to its shareholders as dividends.

A redeemable preferred share gives shareholders the option to redeem shares at their own option rather than the corporation's option.

Which of the following statements is INCORRECT with regards to Federal and Provincial laws?

A corporation can issue more shares than it is authorized in its charter, if the board of directors approves of an increase in the number of authorized shares.

Income tax expense is shown on the income statement.