accounting homework
jfrank40
chapter_12.docx1. Mike has come to you with these statements about corporations:
a) Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership.
b) Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation.
c) When a corporation is formed, organization costs are recorded as an asset.
d) Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation.
e) The number of issued shares is always greater than or equal to the number of authorized shares.
f) A journal entry is required for the authorization of capital stock.
g) Publicly held corporations usually issue stock directly to investors.
h) The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor.
i) The market price of common stock is usually the same as its par value.
j) Retained earnings is the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.
Directions
Indicate whether each statement is true orfalse. Iffalse, identify a way to correct the statement.
2. During its first year of operations, Plight Corporation had the following transactions pertaining to common stock.
Jan. 10 Issued 70,000 shares for cash at $5 per share.
July 1 Issued 40,000 shares for cash at $7 per share.
Directions
(a) Journalize the transactions, assuming that the common stock has a par value of $5 per share.
(b) Journalize the transactions, assuming that the common stock is no-par with a stated value of $1 per share.
3. Locket Co. had the following transactions during the current period:
Mar. 2nd Issued 5,000 shares of $5 par value common stock to attorneys in payment of a bill for $30,000 for services performed in helping the company to incorporate.
June 12th Issued 60,000 shares of $5 par value common stock for cash of $375,000.
July 11th Issued 1,000 shares of $100 par value preferred stock for cash at $110 per share.
Nov. 28th Purchased 2,000 shares of treasury stock for $80,000.
Directions
Journalize these transactions for Locket.
4. On January 1, 2015, the stockholders’ equity section ofHarlequin Corporation shows common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and retained earnings $1,200,000. During the year, the corporation entered into the following treasury stock transactions.
Mar. 1st Purchased 50,000 shares for cash at $15 per share.
July 1st Re-issued 10,000 treasury shares for cash at $17 per share.
Sept. 1st Sold 8,000 treasury shares for cash at $14 per share.
Directions
(a) Journalize the treasury stock transactions.
(b) Revise the entry for September 1st, assuming the treasury shares were sold at $12 per share.
5. Gravy Corporation is authorized to issue both preferred and common stock. The par value of the preferred is $50. During the first year of operations, the company entered into thefollowing transactions pertaining to its preferred stock:
Mar. 1st Issued 20,000 shares for cash at $53 per share.
June 1st Issued 12,000 shares for cash at $57 per share.
Directions
(a) Journalize the transactions.
(b) Post to the stockholders’ equity accounts.
(c) Indicate the financial statement presentation of the related accounts.
6. A new accountant with extensive experiencein partnership accounting was hired by Platch Corporation. Because of the pressure of the new job, the accountant forgot to review textbooks on the topic of corporation accounting. During the first month, the accountant made the following entries for the corporation’s capital stock transactions:
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May 2 |
Cash |
130,000 |
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Capital Stock |
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130,000 |
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Issued 10,000 shares of $10 par value common stock at $13 per share. |
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May 10 |
Cash |
600,000 |
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Capital Stock |
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600,000 |
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Issued 10,000 shares of $50 par value preferred stock at $60 per share. |
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May 15 |
Capital Stock |
15,000 |
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Cash |
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15,000 |
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Purchased 1,000 shares of common stock for the treasury at $15 per share. |
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Cash |
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8,000 |
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Capital Stock |
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5,000 |
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Gain on Sale of Stock |
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3,000 |
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Sold 500 shares of treasury stock at $16 per share. |
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Directions
On the basis of the explanation for each entry, prepare the entry that should have been made for the capital stock transactions.
7. The stockholders’ equity section ofZenith Corporation at December 31st is as follows:
Directions
After reviewing the stockholders’ equity section, write a memo to the Board of Directors answering the following questions:
(a) How many shares of common stock are outstanding?
(b) Assuming there is a stated value, what is the stated value of the common stock?
(c) What is the par value of the preferred stock?
(d) If the annual dividend on preferred stock is $30,000, what is the dividend rate on preferred stock?
(e) If dividends of $60,000 were in arrears on preferred stock, what would be the balance in Retained Earnings?
8. The stockholders’ equity section of Aluminum Company of America (Alcoa) showed the following (in alphabetical order): additional paid-in capital $6,101, common stock $925, preferred stock $55, retained earnings $7,428, and treasury stock 2,828. All dollar data is in millions.
The preferred stock has 557,740 shares authorized, with a par value of $100 and an annual $3.75 per share cumulative dividend preference. At December 31st of the current year, 557,649 shares of preferred are issued and 546,024 shares are outstanding. There are 1.8 billion shares of $1 par value common stock authorized, of which 924.6 million are issued and 844.8 million are outstanding at December 31st.
Directions
