Acc 2301

SE1: Advantages and disadvantages of a corporation

1. Ease of transfer of ownership:
2. Taxation:
3. Separate legal entity:
4. Lack of mutual agency:
5. Government regulations:
6. Continuous existence:

SE2: Effects of Start-up and organisation cost:

At the beginning of 2014, Salinas Company incurred the following start-up and organization costs:
(1) attorneys’ fees with a market value of $10,000, paid with 6,000 shares of $1 par value common stock, and
(2) incorporation fees of $6,000 cash. Calculate total start-up and organization costs.
What will be the effect of these costs on the income statement and balance sheet?

SE3: Business Applications:
Indicate whether each of the following action is related to
a) managing under the corporate form of business, b) using equity financing, c)determining dividend policies,
d)evaluating performance using return on equity or e) issuing stock options.

1. Considering whether to make a distribution to shareholders
2. Controlling day to day operations
3. Determining whether to issue common or preferred stock
4. Compensating management based on the company’s meeting or exceeding the targeted return on equity
5. Compensating employees by giving them the right to purchase shares at a given price
6. Transferring shares without the approval of other owners

E18A: Business Application

In 2014, Konstan Corporation earned $4.40 per share and paid a dividend of $2.00 per share.
At year-end, the price of its stock was $66 per share. Calculate the dividend yield and the price/earnings ratio.
(Round the dividend yield to the nearest tenth of a percent.)

On March 1, 2014, Kissell Corporation began operations with a charter from the state that authorized 100,000 shares of $4 par value common stock.

Over the next quarter, the company engaged in the transactions that follow.

Mar. 1 Issued 30,000 shares of common stock, $200,000.

2 Paid fees associated with obtaining the charter and starting up and organizing the corporation, $24,000.

Apr. 10 Issued 13,000 shares of common stock, $130,000.

15 Purchased 5,000 shares of common stock, $50,000

May 31 The board of directors declared a $0.20 per share cash dividend to be paid on June 15 to shareholders of record on June 10.

Required

1. Record the above transactions using T accounts.

2. Prepare the stockholders equity section of Kissell's balance sheet on May 31, 2014.

Net income earned during the first quarter was $30,000.

3. What effect, if any, will the cash dividend declaration on May 31 have on Kissells net income, retained earnings, and cash flows?

Acc

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