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Exam 11: Proprietorships, Partnerships, and Corporations

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Question 31

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All corporations are subject to extensive government regulation.

A) True
B) False

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Question 32

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Indicate how each event affects thefinancial statements. 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.You do not need to enter dollar amounts Sierra Co. issued 10,000 shares of common stock for $45 per share. The stock has a par value of $10.

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The stock issuance will increase assets...

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Question 33

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Gilligan Corporation was established on February 15, Year 1. Gilligan is authorized to issue 500,000 shares of $6.00 par value common stock. As of December 31, Year 3, Gilligan's stockholders' equity accounts report the following balances: At the end of Year 3, Gilligan decides to issue a 5% stock dividend. At the time of issue, the market price of the stock was $22 per share.What is the amount of retained earnings that will be transferred to paid-in capital as a result of the stock dividend issued by Gilligan Corporation?

What is meant by "double taxation"? Which type of organizational form is more likely to be subject to double taxation?

Which of the following statements about Treasury Stock is correct?

Indicate whether each of the following items is true or false. _____ a)Many successful corporations do not pay dividends to their stockholders. _____ b)Careful study of the financial statements will give investors the ability to predict future movements in the market price of a corporation's stock. _____ c)The price-earnings (P/E)ratio is computed by dividing the earnings per share by the market price per share. _____ d)As a general rule, the higher the P/E ratio, the greater is the optimism for future growth of the corporation. _____ e)The number of shares to purchase in order to attain "significant influence" of a corporation can readily be determined from the financial statements.

What does negative retained earnings indicate?

Powell Corporation had $10 par stock with a market price of $60, when it declared a 2-for-1 stock split. After the stock split, the number of shares outstanding will double, and the market price of the stock should drop to about $30.

The Securities and Exchange Commission (SEC)has the authority to set and enforce auditing, attestation, quality control, and ethics standards for auditors of public companies.

Which of the following statements is the most common explanation as to why a company might have a negative amount of total stockholders' equity on its balance sheet?

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

Why is the market price of a corporation's common stock likely to increase?

Van Buren Corporation issued 5,000 shares of $6 par common stock for $24 per share. For this transaction, Common Stock should be increased by $120,000.

Indicate how each event affects thefinancial statements. 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.You do not need to enter dollar amounts Vancouver Co. paid a $50,000 cash dividend to its shareholders two months after Vancouver declared the dividend.

Ben Weaver is planning to invest in one of the following companies based on their average performance over the past five years, summarized below. If Ben is looking for a company that is likely to achieve rapid growth in revenues and profitability, which one should he choose?

How is treasury stock reported on a corporation's balance sheet?

What is the meaning of "par value" of stock?

The stock market crash in 1929 led to the beginning of the extensive regulation of trading stock on stock exchanges.

Franklin Corporation reported net income of $75,000 in Year 1. The company had 100,000 shares of $12 par value common stock outstanding and a market price of $18 per share. What is Franklin's price-earnings ratio?

Indicate whether each of the following statements is true or false. _____ a)An appropriation of retained earnings limits the amount available for dividends. _____ b)Appropriating retained earnings is considered an asset exchange transaction. _____ c)An appropriation is recorded as a decrease to the appropriated retained earnings account and an increase to retained earnings. _____ d)One reason for an appropriation of retained earnings is that there may be restrictive covenants in credit agreements. _____ e)An appropriation has no effect on the accounting equation.