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Exam 20: Corporations: Formation and Capital Stock Transactions

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Question 1

Multiple Choice

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A corporation has 4,000 shares of 5 percent,$100 par-value preferred stock and 50,000 shares of $2 par-value common stock outstanding.If the board of the directors decides to distribute dividends totaling $100,000,the common stockholders will receive a dividend of

A) $1.00 a share.
B) $1.60 a share.
C) $2.00 a share.
D) $2.40 a share.

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

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B

Question 2

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Just like No-par-value stock,par value stock can be sold for any price.

A) True
B) False

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Question 3

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If a corporation sells 400 shares of 12 percent,$100 par-value preferred stock for $105 a share,the entry to record the transaction will include a credit of ____________________ to the Preferred Stock account.

The entry to record the issuance of 1,000 shares of $2 stated-value common stock for $10 a share consists of a debit to Cash for $10,000 and a credit to Common Stock for

Callable preferred stock gives the shareholder the right to exchange preferred shares of stock for common shares based on the conversion ratio printed on the stock certificate.

Andrews Corporation has 25,000 common shares authorized and 20,000 shares were issued and outstanding at year end.During the year,the corporation's net income after taxes was $50,000.The policy of the corporation has been to declare dividends equal to 15% of its net income.What is the per share amount to be distributed to the common stock holders?

The stockholders of a corporation are agents of the corporation empowered to act for the firm.

The stockholders' ledger for a class of stock is a subsidiary ledger,and the total shares shown must agree with the number of shares in the capital stock account for that class.

The Preferred Stock account is shown in the

Santorini Corporation has outstanding 300,000 shares of $70 par-value preferred stock,issued at an average price of $84 a share.The preferred stock is convertible into common stock at the rate of four shares of common stock for each share of preferred stock.Maryann Miller owns 880 shares of the preferred stock.During the current year she decides to convert 220 shares into common stock.How many shares of common stock will she receive?

In respect to corporate debt,stockholders have ____________________ liability.

If preferred stock is ____________________,its owners must receive the stated dividends for both the current year and any prior years in which the stated dividend was not paid before the common stockholders can receive any dividend.

Common stockholders will receive a dividend

When the issuing corporation retains the right to repurchase shares of preferred stock at a specified price,the preferred stock is said to be

The entry to record a subscription for 100 shares of common stock at par value would consist of a debit to Subscriptions Receivable-Common and a credit to Common Stock.

The amount received in excess of the par value of preferred stock issued is recorded in an account called Paid-in Capital in Excess of Par Value-Preferred Stock.

Stockholders are the ____________________ of a corporation.

Before dividends can be paid,they must be declared and voted upon by the shareholders.

The entry to record the issuance of 1,000 shares of $10 par-value common stock for $14 a share consists of a debit to Cash for $14,000 and a credit to Common Stock for

Common stock can be converted to preferred stock at the shareholder's discretion.