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Exam 8: Proprietorships, Partnerships, and Corporations

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Question 21

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Flynn Corp., which is authorized to issue 25,000 shares of no-par common stock, issued 10,000 shares for $150,000. What effect will this event have on the accounting equation?

A) Increase assets by $375,000 increase, equity by $375,000.
B) Increase assets by $150,000, increase net income by $150,000.
C) Increase assets by $150,000, increase equity by $150,000.
D) Increase assets by $150,000, increase net income by $150,000 and increase assets by $150,000, increase equity by $150,000.

E) A) and D)
F) B) and D)

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Question 22

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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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The number of shares of stock ...

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Question 23

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Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ The Hamilton Corporation began operations by issuing 5,000 shares of $10 stated-value stock at $12. Indicate the effects of this transaction on the financial statements. $\begin{array}{|l|l|l|l|l|l|}\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}\text { Net } \\\text { Income }\end{array} & \begin{array}{c}\text { Cash } \\\text { Flow }\end{array}\\\hline&&&\end{array}$

If a corporation decides to reissue, for cash, preferred treasury stock this is which type of transaction type?

Ransom Corporation issued 10,000 shares of $5 par common stock for $22 per share. As a result of this transaction, Ransom's legal capital increased by $50,000.

Bridge Corporation decides to issue a 15% stock dividend on 20,000 outstanding shares of $10 stated value common stock. The distribution is made at the time the market value of the stock is $50 a share. How will this transaction affect the company's equity accounts?

Discuss a reason why a corporation might "split" its common stock.

Thad Rives is planning to invest in one of the following companies based on their average performance over the past five years, which is presented below. If Thad is looking for a growth company (with earnings that are growing rapidly and probably will continue to grow rapidly) , which one should he choose?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ The stock of the Hamlin Oil Co. was trading at $12 per share on March 27 when the company announced that it had recently discovered a large oil reserve. The stock price immediately went up to $18 per share. The company had 10,000,000 shares outstanding. Indicate the effects of this discovery on Hamlin's financial statements. $\begin{array}{|l|l|l|l|l|l|}\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}\text { Net } \\\text { Income }\end{array} & \begin{array}{c}\text { Cash } \\\text { Flow }\end{array}\\\hline&&&\end{array}$

A separate capital account is maintained for each partner in a partnership.

What are the characteristics of preferred stock?

A distribution by a sole proprietorship to the owner is called a dividend.

Which answer would represent the financial statement presentation of stockholders equity after the following transactions? Issued 200 shares of $12 par value common stock for $25 a share. Five hundred shares are authorized. Purchased 75 shares of treasury stock at $22 a share.

The executives that manage a corporation on a daily business are hired by the company's stockholders.

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

The corporate charter of Llano Corporation authorizes the issuance of 25,000 shares of 5% cumulative preferred stock, $50 par, and 200,000 shares of $10 par common stock. At the end of the current year, the titles and balances of stockholders' equity accounts are as follows:

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

Houston Corporation has the following stock outstanding:

Which of the following statements historically described the term "par value?"

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