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Exam 12: Corporations: Paid-In Capital and the Balance Sheet

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Question 71

True/False

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Retained earnings is equity that is generated internally by corporate business transactions.

A) True
B) False

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Question 72

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Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. No dividends were paid. These factors will result in which of the following?

A) Retained earnings will go down.
B) Retained earnings will go up.
C) Paid-in capital will go down.
D) Paid-in capital will go up.

E) A) and B)
F) B) and C)

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Question 73

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Which of the following would be included in the entry to record the issuance of 5,000 shares of $10 par value common stock at $13 per share cash?

The book value of common stock is equal to the total equity less the book value of preferred stock, divided by the number or common shares outstanding.

A corporation is a separate legal entity formed under the laws of a particular state.

Which of the following is a disadvantage of the corporate form of business?

Every corporation issues preferred stock.

Lerner Company had the following transactions in 2013, its first year of operations. • Issued 20,000 shares of common stock. Stock has par value of $1.00 per share and was issued at $14.00 Per share. • Issued 1,000 shares of $100 par value preferred stock. Shares were issued at par. • Earned net income of $35,000. • Paid no dividends. - At the end of 2013, what is the total amount of Stockholders' equity?

Which of the following describes a retained earnings deficit?

Which one of the following describes financial leverage?

Which of the following is the correct description of dividends in arrears, as it applies to cumulative preferred stock?

Sheffield Company had $42,000 of net income in 2013. Equity at the beginning of the year was $1,200,000 and at the end of the year was $1,600,000. Sheffield has no preferred stock. Please calculate the rate of return on common stockholders' equity. (Round to 3 decimal places.)

Which of the following measures a company's success in using assets to earn income?

Most preferred stock is sold at a price higher than its par value.

From its inception through the year of 2014, Quicksales Company was profitable and made strong dividend payments each year. In the year 2015, Quicksales had major losses and paid no dividends. In 2016, the company started making large profits again, and they were able to pay dividends to all shareholders-both common and preferred. There are 1,500 shares of cumulative, 7% preferred stock outstanding. The preferred stock has a par value of $100. What is the total amount of dividends which should be paid to the preferred shareholders in December, 2016?

On December 2, 2014, Ewell Company purchases a piece of land from the original owner. In payment for the land, Ewell Company issues 8,000 shares of common stock with $1.00 par value. The land has been appraised at a market value of $400,000. Please provide the journal entry for this transaction. $\begin{array} { | l | l | l | } \hline \quad\quad\quad\quad\quad& \quad\quad&\quad\quad \\\hline & & \\\hline & & \\\hline\end{array}$

Hot Tamale Company had $120,000 of Revenues and $125,000 of Expenses. No dividends were paid. Please provide the second of the year-end closing entries. $\begin{array} { | l | l | l | } \hline \quad\quad\quad\quad\quad& \quad\quad&\quad\quad \\\hline & & \\\hline\end{array}$

Which of the following represents one of the basic rights of stockholders?

Which of the following types of stock are considered to be LEAST risky for investors?

A company had $80,000 of Sales revenue and $75,000 of Expenses. Which of the following would be the second of three year-end closing entries?