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Exam 12: Contributed Capital

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Question 1

Multiple Choice

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If a corporation has issued common stock at various prices that exceed par value, legal capital will be made up of the

A) par value of the shares issued.
B) total stockholders' equity plus total liabilities.
C) total amount of contributed capital.
D) total amount of contributed capital plus retained earnings.

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Question 2

Multiple Choice

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The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of common stock on June 14, 2010. The dividend is to be paid on July 15, 2010, to shareholders of record on July 1, 2010. The effects of the entry to record the declaration of the dividend on June 14, 2010 , are to

A) decrease stockholders' equity and increase liabilities.
B) increase stockholders' equity and increase liabilities.
C) decrease stockholders' equity and decrease assets.
D) increase stockholders' equity and decrease assets.

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Question 3

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Duncan Corporation has 2,000 shares of $100 par value, 6 percent cumulative preferred stock and 20,000 shares of $10 par value common stock outstanding. In its first four years of operation, Duncan Corporation paid cash dividends as follows: 2007, $15,000; 2008, $0; 2009, $20,000; 2010, $25,000. Calculate the total cash dividends received by owners of preferred and common stock in each year.

The limited liability of a stockholder can be viewed as both an advantage and a disadvantage.

Sylmar Corporation has 30,000 shares of $100 stated value no-par common stock authorized, and 20,000 shares were outstanding during 2009. The following transactions relate to cash dividends of Sylmar Corporation for the year ended December 31, 2009. Prepare entries in journal form without explanations to record the following transactions:

Dividends in arrears cannot exist in conjunction with

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.

Which of the following could be described as both an advantage and a disadvantage of incorporation?

Berman Corporation was organized during 2010. In organizing, the company incurred the following costs: 1. Paid the state $900 for the corporate charter and related fees of incorporation. 2. Paid the attorney $2,500 for services rendered in connection with filing incorporation papers with the state. 3. Issued 500 shares of $5 par value common stock to an accountant in exchange for accounting services valued at $3,000. Prepare the entries in journal form necessary to record the above transactions without explanations.

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

Dividends in arrears are dividends on

Outstanding shares of stock are

Dividends on cumulative preferred stock do not become a liability of the corporation until they are declared by the board of directors.

A disadvantage of the corporate form of business is

Treasury stock usually is recorded at par value when purchased.

The following information relates to the number of common shares of the Nelly Corporation: 40,000 Authorized shares 15,000 Unissued shares 2,500 Treasury shares Calculate the number of outstanding shares from the information given. Show your calculations.

The following information relates to the number of common shares of the Telly Corporation: 80,000 Authorized shares 30,000 Unissued shares 5,000 Treasury shares Calculate the number of outstanding shares from the information given. Show your calculations.

The dividends yield is measured in terms of "times."

A corporation records a dividend-related liability

Beckham Corporation has 3,000 shares of $100 par value, 7 percent cumulative preferred stock, and 10,000 shares of $10 par value common stock outstanding during its first five years of operation. Beckham Corporation paid cash dividends as follows: 2006, $10,500; 2007, $0; 2008, $65,000; 2009, $30,000; 2010, $15,000. The amount of dividends the common stockholders received during 2006 was