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Accounting II chapter 13
Accounting II chapter 13 definitions and problems
60
Accounting
Undergraduate 2
02/16/2011

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Term
Authorized stock
Definition
The amount of stock that a corporation is authorized to sell as indicated in its charter
Term
By-laws
Definition
The internal rules and procedures for conducting the affairs of a corporation.
Term
Charter
Definition
A document that creates a corporation.
Term
Corporation
Definition
A business organized as a legal entity separate and distinct from its owners under state corporation
Term
Cumulative dividend
Definition
A feature of preferred stock entitling the stockholder to receive current and unpaid prior-year dividends before common stockholders receive dividends.
Term
No-par value
Definition
stock Capital stock that has not been assigned a value in the corporate charter.
Term
Organization costs .
Definition
Costs incurred in the formation of a corporation.
Term
Outstanding stock
Definition
Capital stock that has been issued and is being held by stockholders.
Term
Paid-in
Definition
capital Total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.
Term
Par value stock
Definition
Capital stock that has been assigned a value per share in the corporate charter
Term
Preferred stock
Definition
Capital stock that has some preferences over common stock.
Term
Privately held corporation
Definition
A corporation that has only a few stockholders and whose stock is not available for sale to the general public.
Term
Publicly held corporation
Definition
A corporation that may have thousands of stockholders and whose stock is regularly traded on a national securities exchange.
Term
Retained earnings
Definition
Net income that is retained in the corporation for future use.
Term
Stated value
Definition
The amount per share assigned by the board of directors to no-par stock.
Term
Treasury stock
Definition
A corporation's own stock that has been issued and subsequently reacquired from shareholders by the corporation but not retired.
Term
Kunkel Corporation reports net income of $450,000. Prepare the entry to close net income.
Definition
Dec. 31 Income summary 450000
Retained earnings 450000
Term
On May 10, Mazili Corporation issues 2,000 shares of $10 par value common stock for cash at $18 per share
Definition
May 10
Cash 36000
Common Stock 20000
Paid-in cap. in excess of par 16000
Term
On June 1, Mendoza Inc. issues 3,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share
Definition
June 1
Cash 18000
PIC in excess of stated value 5000
Common Stock 3000
Term
Kane Inc.'s $10 par value common stock is actively traded at a market value of $15 per share. Kane issues 5,000 shares to purchase land advertised for sale at $85,000. Journalize the issuance of the stock in acquiring the land.
Definition
(remeber we do not use the adveritsing rate we use the most determineable amount)
Land 75000
Common Stock 50000
PIC. in excess of par value 25000
Term
On July 1, Goetz Corporation purchases 500 shares of its $5 par value common stock for the treasury at a cash price of $8 per share. On September 1, it sells 300 shares of the treasury stock for cash at $11 per share. Journalize the two treasury stock transactions.
Definition
July 1
Treasury stock 4000
Cash 4000
Sept. 1
Cash 3300
Treasury stock 2400
PIC. from treasury stock 900
Term
Mar. 2 Issued 5,000 shares of $5 par value common stock to attorneys in payment of a bill for $30,000 for services provided in helping the company to incorporate.
June 12 Issued 60,000 shares of $5 par value common stock for cash of $375,000.
July 11 Issued 1,000 shares of $100 par value preferred stock for cash at $110 per share.
Nov. 28 Purchased 2,000 shares of treasury stock for $80,000.
Definition
Mar. 2
Organization expense 30000
Common stock 25000
PIC in excess par value - Comm. stock 5000
June 12
Cash 375000
Common stock 300000
PIC excess par Comm.stock 75000
July 11
Cash 110000
Preferred stock 100000
PIC excess par Pref. stock 10000
Nov. 28
Treasury stock 80000
Cash 8000
Term
T or F
A corporation can issue more shares than it is authorized in its charter, if the board of directors approves of an increase in the number of authorized shares.
Definition
False
Term
T or F
As soon as a corporation is authorized to issue stock, an accounting journal entry should be made recording the total value of the shares authorized.
Definition
False
Term
T or F
Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.
Definition
Flase
They are expensed though Organizational Costs Expense account. Not an Asset.
Term
T or F
Treasury stock should not be classified as a current asset.
Definition
True
Tresury is a contra equity account.
Term
T or F
The term “Capital surplus” can be used instead of “Additional Paid-in Capital”.
Definition
Flase
Term
T or F
The cost of a noncash asset acquired in exchange for common stock should be either the fair market value of the consideration given up or the consideration received, whichever is more clearly determinable.
Definition
True
Term
T or F
Definition
Term
T or F
Definition
Term
T or F
Definition
Term
T or F
Definition
Term
T or F
Definition
Term
T or F
Definition
Term
The controller is the Chief Accounting Officer and has 3 responsibilities
Definition
1. Mantaining the accounting records.
2. Maintianing an adaquate internal controls
3. preparing the finacial reports and taxes
Term
Tresurer has costody of
Definition
1. the corporate funds
2. responsible for maintaining the company cash position.
Term
State laws
Definition
1. prescribe the issuing stock
2. the distribution of earnings permitted to stockholders
3. the effects of retiring stock.
Term
Federal Securities laws
Definition
Govern the sale of capital stockto the general public.
Term
Corporation forming process
Definition
1. application to the secrtary of the stae.
2. after app aproval it is granted a chater
3. develops by-laws
Term
TREASURY STOCK_a corporation's own stock that it has issued and subsequently reacquired from shareholders, but not retired. A corporation may acquire treasury stock for various reasons:
Definition
1. To reissue the shares to officers and employees under bonus and stock compensation plans.

2. To signal to the stock market that management believes the stock is underpriced, in the hope of enhancing its market value.

3. To have additional shares available for use in the acquisition of other companies.

4. To reduce the number of shares outstanding and thereby increase earnings per share.

5. To rid the company of disgruntled investors, perhaps to avoid a takeover, as illustrated in the Ford Motor Company Feature Story.
Term
When Tresury stock is sold for less then it was purchased and thier is no more in Paid-in excess of Tresury stock account the defiency is debit to
Definition
Retained earnings
Term
The difference between common stock issued (1200) and outstanding (1000) is equal to
Definition
Tresuray stock (200)
Term
Paid in Capital is sometimes called
Definition
Contributed capital
Term
Tresury Stock is located after__________
and is ( deducted)
Definition
Retained earnings 610,000
Total paid-in capital and retained earnings 2,387,000
Less: Treasury stock—common (50,000)
Term
Book Value=the equity a common stock holders has in the net assets of owning one share of stock
Definition
Total Stockholders equity divided by number of common stock shares OUTSTANDING
Term
Andrews, Inc. paid $45,000 to buy back 9,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $6 per share. The entry to record the sale includes a
Definition
credit to Paid-in Capital from Treasury Stock for $9,000. <----------
credit to Retained Earnings for $9,000.
debit to Paid-in Capital from Treasury Stock for $45,000.
debit to Retained Earnings for $45,000.
Term
Andrews, Inc. paid $45,000 to buy back 9,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $6 per share. The entry to record the sale includes a
Definition
credit to Paid-in Capital from Treasury Stock for $9,000. <----------
credit to Retained Earnings for $9,000.
debit to Paid-in Capital from Treasury Stock for $45,000.
debit to Retained Earnings for $45,000.
Term
Dailey Company is a publicly held corporation whose $1 par value stock is actively traded at $22 per share. The company issued 2,000 shares of stock to acquire land recently advertised at $55,000. When recording this transaction, Dailey Company will
Definition
A. debit Land for $55,000.
B. credit Common Stock for $44,000.
C. debit Land for $44,000.<------
D. credit Paid-In Capital in Excess of Par Value for $53,000.
Term
A corporation purchases 30,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders’ equity?
Definition
Increase by $1,050,000
Decrease by $600,000
Decrease by $1,050,000 <------
Increase by $600,000
Term
Dividends are declared out of
Definition
Retained Earnings.
Term
Elton Manufacturing Corporation purchased 4,000 shares of its own previously issued $10 par common stock for $92,000. As a result of this event,
Definition
A. Elton’s Common Stock account decreased $40,000.
B. Elton’s total stockholders’ equity decreased $92,000. <----
C. Elton’s Paid-in Capital in Excess of Par Value account decreased $52,000.
D. All of the above.
Term
If no-par stock is issued without a stated value, then
Definition
the entire proceeds are considered to be legal capital.
Term
In published annual reports
Definition
A. subdivisions within the stockholders’ equity section are routinely reported in detail.
B. capital surplus is used in place of retained earnings.
C. the individual sources of additional paid-in capital are often combined. <----------
D. retained earnings is often not shown separately.
Term
Legal capital per share cannot be equal to the
Definition
total proceeds from the sale of par value stock above par value.
Term
Rebel Inc. issued 3,000 shares of no-par common stock with a stated value of $3 per share. The market price of the stock on the date of issuance was $12 per share. The entry to record this transaction includes a
Definition
A. debit to Cash for $9,000.
B. credit to Common Stock for $36,000.
C. credit to Common Stock for $9,000. <--------
D. debit to Paid-in Capital in Excess of Par Value for $36,000.
Term
Under the corporate form of business organization
Definition
the corporation's life is stipulated in its charter.
Term
The ability of a corporation to obtain capital is
Definition
enhanced because of limited liability and ease of share transferability.
Term
The purchase of treasury stock
Definition
decreases common stock outstanding.
Term
When stock is issued for legal services, the transaction is recorded by debiting Organization Expense for the
Definition
Fair Market Value
Term
Slaton Company originally issued 3,000 shares of $10 par value common stock for $90,000 ($30 per share). Slaton subsequently purchases 300 shares of treasury stock for $27 per share and resells the 300 shares of treasury stock for $29 per share. In the entry to record the sale of the treasury stock, there will be a
Definition
credit to Common Stock for $8,100.
credit to Treasury Stock for $3,000.
debit to Paid-In Capital in Excess of Par Value of $9,000.
credit to Paid-In Capital from Treasury Stock for $600. <-------
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