Exam 13: Organization and Operation of Corporations

Owners of _____________________ have a right to be paid both current and all prior periods' unpaid dividends before any dividend is paid to common shareholders.

The costs of bringing a corporation into existence,including legal fees,promoters' fees,and amounts paid to the government are called:

For preferred shares to increase the return earned by common shareholders,the preferred dividend rate as a percentage of the capital raised must be:

Explain the difference between an income statement for a corporation and an income statement for a sole proprietorship,and discuss why the difference arises.

The statement of changes in equity for a corporation shows both how retained earnings and share capital have changed during the accounting period.

When issuing common shares,the initial investment is credited to Common Shares.

TJ Inc.received its charter and began business in 2015.The company was authorized to issue 28,000,$5,noncumulative preferred shares,and 500,000 common shares.Prepare journal entries to record the following transactions that occurred during 2015:

Barb Inc issued 500 common shares in payment of a $1,900 bill from its accountant for assistance in filing its charter.The entry to record this transaction will include:

The liability for preferred dividends declared is recorded on the date of record.

The equity of a corporation changes because of net income or losses,distributions of incomes (dividends)and shareholder investments.

If shares are issued for non-cash assets,the assets are always recorded at the current market value of the shares.

The use of preferred shares to increase return to common shareholders is an example of financial leverage.

Corporations issue preferred shares in order to raise capital without sacrificing control of the corporation and to increase the return earned by common shareholders.

Preferred shares that give the shareholders the option of exchanging their preferred shares for common shares at a specified rate are known as:

Net incomes or losses are recorded in a share capital account.

Justine Corp received its charter and began business in 2015.The company was authorized to issue 20,000,$5,noncumulative preferred shares and an unlimited number of common shares.Prepare journal entries to record the following transactions that occurred during 2015:

The following account balances for Mackenzie Corporation are for the year ended December 31,2015.Complete an Income Statement for the year assuming the income tax rate is 20%.

Describe the components of shareholders' equity.

The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional shares of common shares issued by the corporation is called:

Unpaid preferred dividends are called dividends in arrears.