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Exam 21: Corporate Earnings and Capital Transactions

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Question 21

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Contributed capital represents the cumulative profits and losses of the corporation less dividends declared and distributed.

A) True
B) False

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Question 22

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On the worksheet for the current year ended Dec 31, column totals in the Income Statement section are debit, $230,000 and credit $296,000. Assume that the income and deductions for tax purposes are the same as those for financial reporting and that the company paid estimated taxes of $10,000 to date. Tax rates are 15% for the first $50,000; 25% on the next 25,000; 34% on the next $25,000 and 39% on the excess over $100,000. Prepare the adjusting entry for income taxes.

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Question 23

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The following information was taken from the accounting records of the Arens Corporation on December 31, 2019. Using this information, prepare the Stockholders' Equity section of the corporation's balance sheet. Preferred Stock: 8%, $100 par value; 2,000 shares authorized; 600 shares issued and outstanding; Paid-in Capital in Excess of Par Value-Preferred Stock, $2,000 Common Stock: $50 par value; 5,000 shares authorized; 2,250 shares issued and outstanding; Paid-in Capital in Excess of Par Value-Common Stock, $2,500 Retained Earnings: Total, $155,000; appropriated for office building construction, $50,000

Retained earnings do not represent a cash balance.

An appropriation of retained earnings represents:

The entry to adjust for over-estimated income taxes paid would include a credit to Income Tax Expense.

On April 15, the board of directors declared a 2 for 1 split on Samco's 20,000 outstanding shares of $10 par, common stock. After the split, the total number of shares and par value per share are:

For the current year, Carlton Corporation reported net income before income taxes of $72,000. Using the following corporate income tax rates, compute the corporation's federal income taxes payable. (Assume that the firm's taxable income is the same as its income for financial accounting purposes.)

A corporation paid estimated income taxes of $16,900 during 2019. At the end of the year, the corporation's tax bill is computed to be $18,600. Record the entry to adjust the Income Tax Expense account on page 6 of a general journal. Omit the description.

When treasury stock is purchased, the Treasury Stock account is debited for the entire amount paid for the stock, regardless of the stock's par or stated value.

Information from the Income Statement columns of King Corporation's worksheet on December 31, 2019, is shown below. 1. What is the amount of net income before income tax? 2. What is the amount of income tax on the net income? Use the tax rates set forth below. 3. The corporation paid $5,000 through quarterly deposits. What adjustment is recorded for Income Tax Expense? 4. What is the amount of net income after income tax?

As long as actual tax expense does not materially differ from estimated tax expense, a corporation may record the difference in the subsequent year and not violate the matching principle in so doing.

When a corporation purchases its own stock and intends to reissue that stock at a later date, the cost of the shares is shown in the Assets section of the balance sheet until the stock is reissued.

Company covenants (contracts, borrowing arrangements)may prevent the company from distributing profits to its shareholders.

The--------- value of each share of stock is the total equity applicable to the class of stock divided by the number of shares outstanding.

Samuel Corporation declared and distributed a 10 percent stock dividend on its $3 par common stock in November. At the time of the declaration of the stock dividend there were 10,000 shares of common authorized and 8,000 issued and outstanding. The market value on the date of declaration was $14 per share. The amount credited to Paid-in-Capital in Excess of Par Value -Common Stock is:

To be entitled to receive a cash dividend, an investor must be listed as an owner of the stock on the----------date.

A liability for the payment of cash dividends is recorded:

The Retained Earnings Appropriated-Treasury Stock account is shown in the--------- section of the balance sheet.

When a previously declared stock dividend is distributed, the journal entry is to debit Common Stock Dividend Distributable and credit---------- .