Chapter 13: 2RQ (page 707)
List three characteristics of a corporation.
The three characteristics of a corporation that can be listed are:
a. Separate Legal Entity
b. Limited Liability
c. Indefinite Life
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Journalizing treasury stock transactions and reporting stockholders’ equity
Southern Amusements Corporation had the following stockholders’ equity on
November 30:
Paid-In Capital:
Common Stock—\(5 Par Value; 1,300 sharesauthorized, 250 shares issued and outstanding1,250
Retained Earnings50,000
Total Stockholders’ Equity \) 55,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 3,750
Total Paid-In Capital
\(5,000
On December 30, Southern purchased 200 shares of treasury stock at \)15 per share.
Requirements
2. Prepare the stockholders’ equity section of the balance sheet at December 31, 2018. Assume the balance in retained earnings is unchanged from November 30.
Question: Dividing cash dividends between preferred and common stock
Copperhead Trust has the following classes of stock:
Preferred Stock—6%, \(12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding
Common Stock—\)0.10 par value; 2,100,000 shares authorized, 1,400,000 shares issued and outstanding
Requirements
1. Copperhead declares cash dividends of $44,000 for 2018. How much of the dividends goes to preferred stockholders? How much goes to common stockholders?
Determining paid-in capital for a corporation
Aruba Corporation recently organized. The company issued common stock to an inventor in exchange for a patent with a market value of \(57,000. In addition, Aruba received cash for 6,000 shares of its \)10 par preferred stock at par value and 6,500 shares of its no-par common stock at $20 per share. Without making journal entries, determine the total paid-in capital created by these transactions.
Question: Accounting for cash dividends
Java Company earned net income of \(85,000 during the year ended December 31, 2018. On December 15, Java declared the annual cash dividend on its 4% preferred stock (par value, \)120,000) and a $0.25 per share cash dividend on its common stock (50,000 shares). Java then paid the dividends on January 4, 2019.
Requirements
1. Journalize for Java the entry declaring the cash dividends on December 15, 2018.
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
2. What are some disadvantages of organizing as a corporation?
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