Exam (elaborations)
ACG 11 (1).
Exam of 7 pages for the course ACG 201 at ACG 201 (ACG 11 (1).)
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ACG 11Which of the following is an advantage of the corporate organizational form? - ANS-continuous
life
Which of the following is not considered to be a characteristic of the corporate form of
organization? - ANS-unlimited liability of stockholders
stockholders have all of the following rights except - ANS-to declare when cash dividend will be
paid
Which one of the following is not an advantage of corporations? - ANS-additional taxes
A disadvantage of the corporate form of organization is - ANS-additional taxes
Stockholders have all of the following rights except - ANS-to declare when a cash dividend will
be paid
If a corporation's stock is traded on a stock exchange, such as the New York Stock Exchange
(NYSE), the corporation is classified as - ANS-publicly held corporation
Corporations have several officers who manage the corporation. The officer who has custody of
the corporation's funds and maintains the company's cash position is the - ANS-treasurer
A corporation issued 10,000 of $3 par value common stock for $7 per share. Which of the
following will be part of the journal entry to record the issuance? - ANS-a credit of $30,000 to
Common Stock
Solution:
Debit to cash= 10,000 x 7= 7,000
Credit to Common stock= 10,000 x 3= 30,000
Credit to paid-in capital in excess of par value= 10,000 x (7-3)= 40,000
If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how
much will total stockholders' equity change? - ANS-12,000 decrease
Solution: Stockholder's equity is reduced by the cost of acquiring the treasury stock:
1,000 shares x $12 per share= $12,000
A corporation issued 1,000 shares of its $2.00 par value common stock for $10.00 per share
and later repurchased 100 of those shares for $14.00 per share. Which of the following will be
recorded when the repurchase of the shares is journalized? - ANS-Treasury Stock will be
debited for $1,400
Solution: 100 shares x $14/share= $1,400. Debit the Treasury Stock account to increase it.
, The following data is available for a certain corporation at December 31: Common stock, par $4
(authorized 500,000 shares), $400,000 Treasury stock (at cost $20 per share), $5,000 Based on
the data, how many shares of common stock are outstanding? - ANS-99,750
Dividends in arrears on cumulative preferred stock - ANS-should be disclosed in the notes to
the financial statements
A corporation has 2,000 shares of cumulative preferred stock with a $100 par value per share
and a 5% dividend rate. The dividends are in arrears for two years. If the corporation plans to
distribute $55,000 as dividends in the current year, how much will the common stockholders
receive? - ANS-25,000
Solution: Preferred dividends for current year= 2,000 shares x 100/share x 5%= 10,000
Preferred dividends in arrears for two years (10,000 x 2)= 20,000
Total dividends available= 55,000
Dividends available to common stockholders= 55,000- 30,000= 25,000
A corporation issues 50,000 shares of $75 par value preferred stock for cash at $100 per share.
The entry to record the transaction will include a - ANS-credit to Preferred Stock for $3,750,000
and a credit to Paid-in Capital in Excess of Par Value of $1,250,000
Solution:
Debit to cash for $5,000,000
Credit preferred stock for $3,750,000
Credit paid-in capital in excess of par-- preferred stock for $1,250,000
A corporation's year-end balance sheet showed the following:
8% preferred stock, $20 par value, cumulative, 30,000 shares authorized; 15,000 shares
issued- $300,000
Common stock, $10 par value, 3,000,000 shares authorized; 1,950,000 shares issued,
1,920,000 shares outstanding-19,500,000
Paid-in capital in excess of par value--Preferred stock-60,000
Paid-in capital in excess of par value--Common stock-27,000,000
Retained earnings-7,650,000
Treasury stock (30,000 shares)-630,000
During the year, the corporation declared and paid a $75,000 cash dividend. If the company's
dividends in arrears prior to the current year were $18,000, the corporation's common
stockholders would receive - ANS-33,000
Solution:
Dividends in arrears= 18,000
Current year dividend to preferred stockholders= 15,000 x 20 x 8%= 24,000
Total paid to preferred stockholders= 18,000 + 24,000= 42,000
Total paid to common stockholders= 75,000 - 42,000= 33,000
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