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Exam 8: Proprietorships, Partnerships, and Corporations

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Question 61

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Discuss possible reasons why a corporation may establish an appropriation of retained earnings.

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Appropriations are sometimes required by...

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Question 62

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Which of the following statements is a reason why a company would buy treasury stock?

A) Because management believes the market price of stock is undervalued.
B) To have stock available to issue to employees in stock option plans.
C) To avoid a hostile takeover.
D) All of these are reasons a company would buy treasury stock.

E) B) and D)
F) B) and C)

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Question 63

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A separate capital account would be maintained for each partner in a partnership.

The class or type of stock that every corporation must have is preferred stock.

Which of the following statements best describes the term "par value?"

The par value of a company's stock:

At the end of the accounting period, Houston Company had $6,400 of par value common stock issued, additional paid-in capital in excess of par value − common of $7,900, retained earnings of $7,000, and $4,000 of treasury stock. The total amount of stockholders' equity is:

At the time that Kirby Company issued a 2-for-1 stock split, the company had 5,000 shares of $6 par value common stock outstanding. Stockholders' equity also contained $15,000 of additional paid-in capital and $22,000 of retained earnings. Immediately after the stock split the:

Montana Company was authorized to issue 90,000 shares of common stock. The company had issued 33,000 shares of stock when it purchased 5,000 shares of treasury stock. The number of outstanding shares of common stock was:

Preferred stockholders' claims to a corporation's assets take precedence over the claims of some creditors.

What is a common reason for a corporation to "split" its stock?

Fred and Barney started a partnership. Fred invested $17,000 in the business and Barney invested $25,500. The partnership agreement stipulated that profits would be divided as follows: Each partner would receive a 8% return on invested capital with the remaining income being distributed equally between the two partners. Assuming that the partnership earned $38,000 during an accounting period, the amount of income assigned to the two partners would be: $\begin{array}{cc} &\text { Fred} && \text { Barney } \\\end{array}$ A. $\begin{array}{cc} \$15,940 & \$15,260 \\\end{array}$ B. $\begin{array}{cc} \$17,000 & \$21,000 \\\end{array}$ C. $\begin{array}{cc} \$19,000 & \$19,000 \\\end{array}$ D. $\begin{array}{cc} \$18,660 & \$19,340\\\end{array}$

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Use only one letter for each element. You do not need to enter amounts. Increase = IDecrease = D No Affected = NAThe Craig Corporation began operations on January 1, Year 1 by issuing 5,000 shares of $6 par-value stock at $12. Indicate the effects of this transaction on the financial statements.

In which section of the balance sheet would Treasury Stock be reported?

Preferred stockholders generally have no voting rights in a corporation.

Ogilvie Corporation issued 12,000 shares of no-par stock for $40 per share. Ogilvie was authorized to issue 35,000 shares. What effect will this event have on the company's financial statements?

The payment of a previously declared cash dividend will:

Montana Company was authorized to issue 200,000 shares of common stock. The company had issued 50,000 shares of stock when it purchased 10,000 shares of treasury stock. The number of outstanding shares of common stock was:

Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships and corporations.

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Use only one letter for each element. You do not need to enter amounts. Increase = IDecrease = D No Affected = NAGrover Company declared a 2-for-1 stock split. Before that announcement, Grover had 40,000 shares of outstanding common stock.