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Exam 11: Proprietorships,partnerships,and Corporations

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Question 31

Multiple Choice

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On July 1,Year 1,Village Bookstore,Inc.appropriated retained earnings in the amount of $36,000 for a future remodeling project in the basement of the bookstore.On June 30,Year 1,the balance of Retained Earnings was $82,800 and the Cash balance was $43,200.Which of the following answers shows the effect of the July 1 event on the elements of the financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

E) A) and C)
F) All of the above

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Question 32

Multiple Choice

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On September 1,Year 1,Orville Corporation has unrestricted retained earnings of $600,000,appropriated retained earnings of $400,000,cash of $850,000,and accounts payable of $50,000.What is the maximum amount that can be used for cash dividends?

A) $850,000
B) $600,000
C) $800,000
D) $450,000

E) A) and C)
F) B) and C)

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Question 33

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Establishing a sole proprietorship generally requires the owner to get a charter from the state government.

Chisolm Corporation issued 10,000 shares of $5 par common stock for $22 per share.As a result of this transaction,Chisolm's legal capital increased by $50,000.

Personal liability is a significant disadvantage of the partnership form of business organization.

Articles of incorporation,prepared by a business that wishes to incorporate,normally include,but are not limited to,the corporation's name and purpose,its location,and provisions for capital stock.

A partner is responsible for his/her own actions,but not for actions taken by another partner on behalf of the partnership.

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.

Which of the following statements about Treasury Stock is correct?

How would the declaration of a cash dividend affect the calculation of a company's price-earnings ratio? (Hint: Do not consider any change in the market price of the stock that might occur because of the declaration of the dividend. )

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 number of shares outstanding after the stock dividend is issued?

Which of the following journal entries will be used to record the stock dividend?

A corporation might buy some of its own stock to help keep the market price from falling.

Which of the following is not normally a preference given to the holders of preferred stock?

The book value of a share of stock is equal to the market or selling price of the stock.

What effect will the declaration and distribution of a stock dividend have on net income and cash flows?

In accordance with restrictive debt covenants,Maynard Company appropriated $20,000 of retained earnings.Which of the following entries would be required to recognize this appropriation?

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?

Llewelyn Company purchased 1,000 shares of its own $10 par value common stock when the market price of the stock was $36 per share.Which of the following journal entries would be used to record the purchase of treasury stock?

Helena Corporation declared a 2-for-1 stock split on 8,000 shares of $6 par value common stock.If the market price of the stock had been $25 a share before the split,the par value,number of shares,and approximate market value after the split would be: