Chapter 13: 1RQ (page 707)
What is a corporation?
A corporation is an organization that includes generally a group of people or a company that is authorized by the state to act as a single entity and recognized as such in law for specific purposes.
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What is the price/earnings ratio, and how is it calculated?
What account is used to record the premium when issuing common stock? What type of account is this?
Question - Describing corporation characteristics
Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.
Requirements
1. Which advantage of incorporating is most applicable? What are other advantages of organizing as a corporate entity?
Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders’ equity
The balance sheet of Cullins Management Consulting, Inc. at December 31, 2017, reported the following stockholders’ equity:
Common Stock—\(10 Par Value; 200,000 sharesauthorized, 22,000 shares issued and outstandingPaid-In Capital:
163,000
\) 220,000
580,000
Retained Earnings
Total Stockholders’ Equity \( 743,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 360,000
Total Paid-In Capital
During 2018, Cullins completed the following selected transactions:
Feb. 6 Declared a 5% stock dividend on common stock. The market value of
Cullins’s stock was \)25 per share.
15 Distributed the stock dividend.
Jul. 29 Purchased 2,000 shares of treasury stock at \(25 per share.
Nov. 27 Declared a \)0.20 per share cash dividend on the common stock outstanding.
Requirements
1. Record the transactions in the general journal.
2. Prepare a retained earnings statement for the year ended December 31, 2018. Assume Cullins’s net income for the year was $87,000.
3. Prepare the stockholders’ equity section of the balance sheet at December 31, 2018.
Question: Journalizing issuance of stock—at par and at a premium
Colorado Corporation has two classes of stock: common,
Requirements
2. Journalize Colorado’s issuance of 4,500 shares of preferred stock for a total of $135,000
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