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 issuance of stock
Steller Systems completed the following stock issuance transactions:
May 19 Issued 1,700 shares of \(3 par value common stock for cash of \)10.50 per share.
Jun. 3 Issued 300 shares of \(9, no-par preferred stock for \)15,000 cash.
11 Received equipment with a market value of \(68,000 in exchange for 5,000 shares of the \)3 par value common stock.
Requirements
1. Journalize the transactions. Explanations are not required.
Journalizing a stock dividend and reporting stockholders’ equity
The stockholders’ equity of Lakeside Occupational Therapy, Inc. on December 31, 2017, follows:
Common Stock—\(1 Par Value; 1,200 shares
authorized, 400 shares issued and outstanding
Paid-In Capital:
120,000
400
2,000
Retained Earnings
Total Stockholders’ Equity \) 122,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 1,600
Total Paid-In Capital
\(
On April 30, 2018, the market price of Lakeside’s common stock was \)16 per share and the company declared a 13% stock dividend. The stock was distributed on May 15.
Requirements
1. Journalize the declaration and distribution of the stock dividend.
2. Prepare the stockholders’ equity section of the balance sheet as of May 31, 2018. Assume Retained Earnings are $120,000 on April 30, 2018, before the stock dividend, and the only change made to Retained Earnings before preparing the balance sheet was closing the Stock Dividends account.
Identifying advantages and disadvantages of a corporation
Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.
e. Exposure to double taxation is evident.
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
3. How many shares of common stock are outstanding after the purchase oftreasury stock?
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?
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