Exam 13: Introduction to Corporations

Orville 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?

The ability of a corporation to obtain capital is

Retained earnings is a temporary account.

The following information is available from the accounting records of DeWitt Engineering Ltd. for the year ended June 30, 2014: Instructions Prepare a corporate Income Statement for the year ended June 30, 2014. The company has a 30% income tax rate.

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

One characteristic of preferred shares is a dividend preference.

Which of the following statements about dividends is NOT accurate?

Tantramar Corporation has the following shareholders equity on July 31, 2013: The maximum number of common shares that Tantramar can issue is

Yaya Blossom's Inc. has a March 31, 2014 fiscal year end and a 35% income tax rate. The following information is available for its 2014 year end: 1. Performed $880,000 service revenue and paid $325,000 in salaries. Interest expense was $12,600. 2. Paid dividends in December 2013 of $14,000 that had been declared in November 2013. 3. On March 10, 2014 declared dividends of $19,000 payable April 30, 2014. 4. Recorded and remitted taxes of $140,000 (related to 2014 fiscal year) during the year. 5. Issued common shares for $15,000 on January 31, 2014. 6. Retained earnings balance on April 1, 2013 is $67,000. Instructions a. Prepare an income statement and record the adjustment to income tax. b. Prepare a statement of retained earnings.

Byrne Corporation had the following accounts at January 1, 2014: common shares, unlimited number of shares authorized, 7,000 shares issued, $197,000; preferred shares, $9.50 cumulative, unlimited number of shares authorized, 2,000 shares issued, $63,500; retained earnings, $263,000. 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, 2014.

Companies can only be incorporated under a federal basis.

Contributed capital of a company includes share capital and retained earnings.

Which of the following is NOT true of a corporation?

Lee Holdings Ltd. was incorporated on January 2, 2014 and on that date issued 50,000 common shares for cash at $1 each. On April 30, Lee issued 1,000 preferred, $3 cumulative preferred shares, convertible to common shares at the rate of 6 common shares for one preferred share. The preferred shares were issued for $18 each. On October 15, 600 of the preferred shares were converted to common shares. On that date, the market value was $1.50 for the common shares and $17.50 for the preferred shares. Instructions Journalize the share transactions described.

Dividends in arrears on cumulative preferred shares

Moreland Holdings Inc. has authorized share capital of an unlimited number of common shares and 1,000,000 preferred, $3-cumulative preferred shares. At January 1, 2014, the balances in its share capital accounts were $45,000 in common shares representing 15,000 shares and $30,000 in preferred shares representing 1,000 shares. The retained earnings balance on that date was $180,000. Profit for the year ending December 31, 2014 was $24,000. There were no dividends in arrears at January 1, 2014 and no dividends were declared during 2014. During 2014, Moreland had the following share transactions: Mar 1 Issued 4,000 common shares for $5 each. Jun 30 Issued 500 preferred shares for $11 each. Sep 1 Issued 60,000 common shares in exchange for land valued at $285,000. Instructions a. Journalize the share transactions. b. Prepare the equity section of Moreland's balance sheet at December 31, 2014 and describe any additional disclosure required related to share capital. c. Calculate return on equity for 2014.

The trial balance of Terris Inc. for the year ended September 30, 2014, prior to recording of tax expenses, but after all other adjustments, is as follows. All accounts are their normal balance (debit or credit). Terris has a tax rate of 30%. Instructions Prepare the income statement and statement of retained earnings for Terris Inc. for the year ended September 30, 2014.

A cash dividend account is never closed during the closing process.

Baden Corporation is a publicly held corporation whose shares, issued at $1 per share are actively traded at $20 per share. The company issued 1,000 shares to acquire land recently appraised at $15,000. When recording this transaction, Baden will

The date at which ownership is determined for the purpose of determining who should receive a dividend is the