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Exam 8: Proprietorships, Partnerships, and Corporations

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Question 41

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One of the common reasons that a company purchases its own stock is to decrease its earnings per share.

A) True
B) False

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Question 42

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A purchase of treasury stock is an asset use transaction.

A) True
B) False

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Question 43

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Flagler Corporation shows a total of $625,000 in its common stock account and $1,100,000 in its paid-in capital in excess of par value − common stock account. The par value of Flagler's common stock is $5. How many shares of Flagler stock have been issued?

Indicate how each event affects the horizontal financial statements model. 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. Use only one letter for each element. You do not need to enter amounts. Increase = IDecrease = D No Affected = NAFort Worth Company declared a cash dividend but has not yet paid the money to the shareholders.

Which of the following is not considered an advantage of the corporate form of business organization?

The balance sheet of a sole proprietorship will report two equity accounts: one for amounts contributed by the owner, and one for the earnings of the business.

Weller Corporation issued 10,000 shares of no-par common stock for $25 per share. This event increases the common stock account by $250,000.

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: $\begin{array}{ccc}\text { Par value}&\text { Number of Shares }&\text { Market Value }\\\end{array}$ A. $\begin{array}{ccc}&\$ 6.00 &&& 16,000 &&&&&& \$ 12.50 \\\end{array}$ B. $\begin{array}{ccc}&\$ 6.00 &&& 8,000 &&&&&&& \$ 25.50 \\\end{array}$ C. $\begin{array}{ccc}&\$ 3.00 &&& 16,000 &&&&&& \$ 12.50 \\\end{array}$ D. $\begin{array}{ccc}&\$ 3.00 &&& 16.000 &&&&&& \$ 25.00\end{array}$

Turner Corporation has 150,000 shares of $12 par value common stock issued and outstanding.Required: If Turner Corporation issued a 3-for-1 stock split, what dollar amount would be shown for common stock on the balance sheet after the stock split?

Kellogg, Incorporated purchased 200 shares of its own $20 par value stock for $30 cash per share. Which of the following answers reflects how this purchase of treasury stock would affect Kellogg's financial statements?

Which of the following would not be a reason for the market price of Carlyle Corporation to increase?

Which type of stock, common or preferred, must all corporations have?

Indicate how each event affects the horizontal financial statements model. 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. Use only one letter for each element. You do not need to enter amounts. Increase = IDecrease = D No Affected = NAVancouver Company paid a $50,000 cash dividend to its shareholders on July 5, Year 1, which was 2 months after Vancouver declared the dividend.

Describe the varying degrees to which closely held corporations and publicly traded corporations are regulated.

Indicate how each event affects the horizontal financial statements model. 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. Use only one letter for each element. You do not need to enter amounts. Increase = IDecrease = D No Affected = NAMoreno Company appropriated $12,000,000 of retained earnings for the purpose of building a new office building.

In accordance with restrictive debt covenants, Maynard Company appropriated $20,000 of retained earnings. How would the appropriation affect the financial statements?

Treasury Stock is reported on the balance sheet between liabilities and stockholders' equity.

On June 10, Year 1, Burton Builders, Incorporated, a publicly traded company, announced that it had been awarded a contract to build a football stadium at a contract price of $500 million. This contract would increase its projected revenues by 20% over the next three years. Which of the following statements is correct with regard to this announcement?

Describe the conditions that would exist if a company is said to be experiencing entrenched management and the disadvantages of this type of management structure.

Fred and Barney started a partnership. Fred invested $20,000 in the business and Barney invested $32,000. The partnership agreement stipulated that profits would be divided as follows: Each partner would receive a 15% return on invested capital with the remaining income being distributed equally between the two partners. Assuming that the partnership earned $38,000 during an accounting period, the amount of income assigned to the two partners would be: $\begin{array}{cc} &\text { Fred} && \text { Barney } \\\end{array}$ A. $\begin{array}{cc} \$20,500 & \$17,500 \\\end{array}$ B. $\begin{array}{cc} \$20,000 & \$18,000 \\\end{array}$ C. $\begin{array}{cc} \$19,000 & \$19,000 \\\end{array}$ D. $\begin{array}{cc} \$18,100 & \$19,900\\\end{array}$