Name a characteristic of a corporation.
the owners of a corporation have limited liability for the corporation's debts.
Name a characteristic that is a disadvantage of the corporate form of business.
Double Taxation
What would be included in the entry to record the issuance of 5,000 shares of $10 par value common stock at $13 per share?
Cash would be debited for $65,000.
TRUE or FALSE: Retained earnings represent capital that the corporation has earned through profitable operations.
TRUE
What occurs when a shareholder invests cash in a coporation?
Both assets and stock holders's equity are increased
The following information is from the balance sheet of Tudor Corporation as of December 31, 2010.
Preferred Stock, $100 par $500,000
PIC in excess of par-preferred 35,000
Common stock, $1 par 190,000
PIC in excess of par-common 380,000
Retained earnings 1
$1,105,000
TRUE or FALSE: Dividends are a distribution of cash or other assets to the stockholders.
true
TRUE or FALSE: Dividends decrease both the assets and the total stockholders' equity of corporation.
true
A corporation declares a dividend of $.75 per share on 12,500 shares of common stock. Which of the following would be included in the entry to record the declaration?
Retained earnings would be debited for $9,375.
What is one thing that occurs when a previously declared dividend is paid?
Liabilities decrease
When companies "pass the dividend", the dividends are said to be what?
in arrears.
What is considered the amount of owners' equity on the company's books for each share of its stock?
Book value
If a company has only common stock, which of the following is the result of dividing total stockholders' equity by the number of shares outstanding?
The result is book value per share of common stock.
Which of the following is the amount computed by the following formula?
(Net income-preferred dividends) / Average common stockholders' equity
The amount computed from the formula is the rate of return on common stockholders' equity.
On what date do dividends become a liability of a corporation?
on the declaration date.
What amount is computed with this formula:
(Net income + interest expense) / Average total assets
the rate of return on total assets
What measures a company's success in using assets to earn income?
the rate of return on total assets measures a company's success in using assets to earn income.
What amount must be determined to account for the income tax?
Income tax expense and income tax payable must be determined
What occurs when income before income tax from the income statement exceeds taxable income from the income tax return filed with the IRS?
deferred tax liability is credited
Marshall Corporation has an income tax rate of 35%, income before income tax of $730,000, and taxable income of $780,000. Which of the following would be included in the entry to recorded income tax expense?
deferred tax liability is debited for $17,500.
what types of stock can a corporation issue?
both common stock and preferred stock can be issued.