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Exam 11: Contributed Capital

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Question 91

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Prepare the entries in journal form necessary to record the following stock transactions of Fitzgerald Corporation.These transactions represent all treasury stock transactions entered into by the company.(Omit explanations.) June 1 Purchased 2,000 shares of its own $\$ 30$ par value common stock for $\$ 70$ per share, the current market price. 10 Sold 500 shares of treasury stock purchased on June 1 for $\$ 80$ per share 20 Sold 700 shares of treasury stock purchased on June 1 for $\$ 58$ per share. 30 Retired the remaining shares purchased on June 1 . The original issue price was $\$ 42$ per share.

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Question 92

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The price/earnings (P/E) ratio is measured in terms of

A) dollars.
B) a percentage.
C) times.
D) days.

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Question 93

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The sale of treasury stock cannot result in

When common stock with a par value is sold for a price that exceeds par value,the Common Stock account is credited only for the par value of the shares sold.

Use the following information to answer the question below. When Calvert Corporation was formed on January 1,2010,the corporate charter provided for 50,000 shares of $20 par value common stock.The following transactions were among those engaged in by the corporation during its first month of operation: 1) The corporation issued 200 shares of stock to its lawyer in full payment of the $5,000 bill for assisting the company in drawing up its articles of incorporation and filing the proper papers with the state agency. 2) The company issued 8,000 shares of stock at a price of $25 per share. 3) The company issued 8,000 shares of stock in exchange for equipment that had a fair market value of $160,000. The entry to record transaction 3 would be:

Indicate on the blanks below the net effect (I = increase,D = decrease,NE = no effect)of each of the following entries on working capital. _____ 1.To record the declaration of a cash dividend _____ 2.To record the payment of a previously declared and recorded cash dividend _____ 3.To close the Dividends account at the end of the accounting period

When no-par common stock has a stated value,the stated value of the shares issued normally is considered the legal capital of the corporation.

Return on equity equals average stockholders' equity divided by net income.

Identify (by code letter)each of the following characteristics as being an advantage of (A),a disadvantage of (D),or not applicable to (N)the corporate form of business.

A corporation has 5,000 shares of 8 percent noncumulative preferred stock and 10,000 shares of common stock outstanding.Par value for each is $100.No dividends were paid last year,but this year a $93,000 dividend is paid.How much of this $93,000 goes to the holders of common stock?

Treasury stock is reported as an asset on the balance sheet because treasury shares may be sold later.

The declaration of a cash dividend causes an increase in a corporation's liabilities at the date of record.

Which of the following classifications represents the fewest shares of common stock?

An advantage of the corporate form of business is

The par value of the common stock represents the

Which of the following phrases is not descriptive of the corporate form of business?

All of the following are stockholders' equity accounts except

The entry to record the declaration of a cash dividend will

To form a corporation,most states require persons called incorporators to sign and file it with proper state official.This application contains the articles of incorporation.

Use the following information to answer the question below. On January 1,2010,Falcon Corporation had 40,000 shares of $10 par value common stock issued and outstanding.All 40,000 shares had been issued in a prior period at $17 per share.On February 1,2010,Falcon purchased 6,100 shares of treasury stock for $19 per share and later sold the treasury shares for $26 per share on March 2,2010. What amount of gain due to these treasury stock transactions should be reported on the income statement for the year ended December 31,2010?