Question 1

What is the importance of record date for a corporation that has declared dividends?

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Question 2

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:

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Question 3

What is the meaning of "par value" of stock?

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Question 4

Discuss a few common reasons for increases in the market price of a corporation's common stock.

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Question 5

Explain the significance of (a)a high,and (b)a low,price-earnings ratio.

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Question 6

On what date do dividends become a legal liability of a corporation?

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Question 7

Which of the following is a disadvantage of a sole proprietorship?

Accepted Answer

The disadvantage of a sole proprietorship is that the owner has unlimited liability, meaning they are personally responsible for all of the business's debts and obligations. This can put the owner's personal assets at risk if the business runs into financial trouble.

Question 8

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

Accepted Answer

The lack of government regulation is not considered an advantage of the corporate form of business organization. In fact, corporations are subject to various regulations and oversight by government entities. The ability to raise capital, continuity of existence, and ease of transferability of ownership are all commonly cited advantages of the corporate form.

Question 9

Describe cumulative preferred stock.

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Question 10

Which of the following entities would have the "Paid-in Capital in Excess" account in the equity section of the balance sheet?

Accepted Answer

Paid-in Capital in Excess is a term used for the additional amount received by a corporation from the sale of its stock over and above the par value of the stock. Hence, only a corporation would have a Paid-in Capital in Excess account in its equity section of the balance sheet. Municipalities, sole proprietorships, and partnerships do not issue stock, and therefore, they do not have a Paid-in Capital in Excess account.

Question 11

What is a common reason for a corporation to "split" its stock?

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Question 12

Explain the differences in recording the initial issue of stock for (a)par-value, (b)stated- value,and (c)no-par stock.

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Question 13

The term "double taxation" refers to which of the following?

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Double taxation refers to the situation where a company's profits are taxed at the corporate level as well as at the individual level when distributed as dividends to shareholders. In a corporation, the corporation must pay income tax on its net income, and its stockholders must pay income tax on their dividends. This results in double taxation.

Question 14

Show the effect of a stock dividend on the accounting equation.

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Question 15

Will the number of shares of stock issued and the number of shares of stock outstanding always be the same? Why or why not?

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Question 16

Discuss possible reasons why a corporation may establish an appropriation of retained earnings.

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Question 17

Which form of business organization is established as a legal entity separate from its owners?

Accepted Answer

A corporation is established as a separate legal entity from its owners, meaning it can enter into contracts, own assets, and be held liable for its own debts and obligations. This distinguishes it from sole proprietorships and partnerships, where the business and its owner(s) are considered to be one and the same for legal and tax purposes.

Question 18

In which section of the balance sheet would Treasury Stock be reported?

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Question 19

Garber Corporation had 20,000 shares of $12 par value common stock outstanding and declared a four-for-one stock split.How many new shares of stock would then be outstanding and what would be the par value of the new stock?

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Question 20

What is treasury stock?

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Quiz 11: Proprietorships,partnerships,and Corporations