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Exam 21: Corporate Earnings and Capital Transactions

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Question 41

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Declarations of cash dividends and stock dividends are debited to the Retained Earnings account.

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B) False

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Question 42

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Selected transactions of the Hayward Corporation during 2013 and 2014 are given below. Record the transactions on page 6 of a general journal. Omit descriptions.

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Question 43

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If the corporation's income tax computed at the end of the year is less than the total of quarterly deposits, the necessary adjustment will result in a

The income statement of a corporation and a sole proprietorship are similar with the exception of

After all revenue and expense accounts, other than Income Tax Expense, have been extended to the Income Statement section of the worksheet of Genexo Corporation, the net income is determined to be $200,000. 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.) $\begin{array} { l l } \text { Taxable Income } & \text { Tax Rate } \\\hline \text { First } \$ 50,000 & 15 \text { percent } \\\text { Next } \$ 25,000 & 25 \text { percent } \\\text { Next } \$ 25,000 & 34 \text { percent } \\\text { Next } \$ 235,000 & 39 \text { percent } \\\text { Over } \$ 335,000 & \text { See IRS publications }\end{array}$

Retained earnings do not represent a cash fund.

Information from the Income Statement columns of King Corporation's worksheet on December 31, 2013, is shown below. $\begin{array}{lr}\text { Sales } & \$ 230,000 \mathrm{Cr} . \\\text { Purchases } & 155,000 \mathrm{Dr} . \\\text { Selling Expense } & 55,000 \mathrm{Dr} . \\\text { Income Tax Expense } & ?\\\text { General and Administrative Expense } & \$ 32,500 \mathrm{Dr} \\\text { Amortization of Organization Costs } & 150 \mathrm{Dr} \\\text { Income Summary } & 42,500 \mathrm{Dr} \\\text { Income Summary } & 52,500 \mathrm{Cr}\end{array}$ 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. What adjustment is recorded for Income Tax Expense? The corporation paid $5,000 through quarterly deposits. 4. What is the amount of net income after income tax? $\begin{array} { l l } \text { Taxable Income } & \text { Tax Rate } \\\hline \text { First } \$ 50,000 & 15 \text { percent } \\\text { Next } \$ 25,000 & 25 \text { percent } \\\text { Next } \$ 25,000 & 34 \text { percent } \\\text { Next } \$ 235,000 & 39 \text { percent } \\\text { Over } \$ 335,000 & \text { See IRS publications }\end{array}$

Deferred income taxes arise because the taxable income of a corporation can differ from the net income reported on its financial statements.

A corporation has paid estimated income taxes of $89,800 during the year 2013. At the end of the year, the corporation's tax bill is computed to be $83,000. Record the entry to adjust the Income Tax Expense account on page 6 of a general journal. Omit the description.

A 3-for-2 stock split will triple the reported dollar amount of stockholders' equity.

A corporation has paid estimated income taxes of $52,100 during the year 2013. At the end of the year, the corporation's tax bill is computed to be $57,500. Record the entry to adjust the Income Tax Expense account on page 6 of a general journal. Omit the description.

The Santa Fe Corporation is authorized to issue 6,000 shares of 4 percent, $100 par-value preferred stock and 20,000 shares of no-par-value common stock with a stated value of $40 per share. On December 31, 2013, 2,000 shares of preferred stock and 8,000 shares of common stock are issued and outstanding. The corporation's transactions affecting stockholders' equity during 2014 are given below. Record the transactions on page 15 of a general journal. Omit descriptions.

A liability for the payment of cash dividends is recorded

An appropriation of retained earnings reduces the amount of retained earnings available for dividend declarations.

After all revenue and expense accounts, other than Income Tax Expense, have been extended to the Income Statement section of the worksheet of Folk Enterprises, Inc., the net income is determined to be $300,000. 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.) $\begin{array} { l l } \text { Taxable Income } & \text { Tax Rate } \\\hline \text { First } \$ 50,000 & 15 \text { percent } \\\text { Next } \$ 25,000 & 25 \text { percent } \\\text { Next } \$ 25,000 & 34 \text { percent } \\\text { Next } \$ 235,000 & 39 \text { percent } \\\text { Over } \$ 335,000 & \text { See IRS publications }\end{array}$

Total stockholders' equity would be decreased by

A corporation reported a net income of $90,000 for its fiscal year and declared and paid cash dividends of $60,000. A stock dividend recorded at $30,000 was also distributed during the year. If the beginning balance of the Retained Earnings account was $140,000, the ending balance is

In each of the following situations, what is the amount of profit or loss? In each situation, what account will be debited and credited, and for what amount, in the journal entry to close the Income Summary account? 1. The total of the debit column in the Income Statement section of the worksheet was $94,000 and the total of the credit column in that section was $104,000. 2. The total in the debit column of the Income Statement section was $200,000 and the total of the credit column was $100,000. 3. The total of the debit column in the Balance Sheet section was $53,000 and the total of the credit column in that section was $55,000.

A corporation's own capital stock that has been reacquired is called ____________________ stock.

Which of the following would not change the amount of total retained earnings for the year?