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Exam 21: Corporate Earnings and Capital Transactions

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Question 1

True/False

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Property that is received as a gift should be recorded in the corporation's records at the asset's fair market value.

A) True
B) False

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Question 2

Multiple Choice

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Which of the following would be found on a corporation's income statement?

A) Retained Earnings
B) Dividends Payable
C) Income Tax Expense
D) Stockholder's Equity

E) C) and D)
F) B) and D)

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C

Question 3

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Selected transactions of the Streng Corporation during 2019 and 2020 are given below. Record the transactions on page 6 of a general journal. Omit descriptions. 2019 Dec. 31 Recorded the adjusting entry for income tax expense. During 2019, quarterly deposits were made totaling $44,000 for the year. When the worksheet was prepared, the accountant estimated that the tax expense for the year would be $45,400. 2020 Mar. 15 Filed the income tax return for 2019. The actual tax for the year was $46,000. Apr. 15 Paid first quarterly installment of $12,400 for 2020 estimated income tax. May 8 Declared a dividend of $1.20 per share on the 20,000 shares of common stock outstanding. The dividend is payable on July 8 to stockholders of record on May 27. June 15 Paid second quarterly installment of $12,400 for 2020 estimated income tax. July 8 Paid dividend declared on May 8. Dec. 31 Recorded the adjusting entry for income tax expense. During 2020 quarterly deposits were made totaling $49,600 for the year. When the worksheet was prepared, the accountant estimated that the tax expense for the year would be $48,000.

When a corporation reacquires its own shares of stock,

The following information was taken from the accounting records of the Goodens Corporation on December 31, 2019. Using this information, prepare the Stockholders' Equity section of the corporation's balance sheet. Preferred Stock: 10%, $200 par value; 10,000 shares authorized; 2,400 shares issued and outstanding; Paid-in Capital in Excess of Par Value-Preferred Stock, $8,000 Common Stock: $100 par value; 20,000 shares authorized; 9,000 shares issued and outstanding; Paid-in Capital in Excess of Par Value-Common Stock, $10,000 Retained Earnings: Total, $210,000; appropriated for factory construction, $80,000

A corporation reported a net income of $135,000 for the current fiscal year and declared and paid cash dividends of $58,000 and declared and distributed a stock dividend recorded at $45,000. If the beginning balance of the Retained Earnings account was $190,000, the ending balance is:

On the worksheet for the current year ended Dec 31, column totals in the Income Statement section are debit, $179,000 and credit $224,000. Assume that the income and deductions for tax purposes are the same as those for financial reporting and that the company paid estimated taxes of $5,000 to date. Tax rates are 15% for the first $50,000; 25% on the next 25,000; 34% on the next $25,000 and 39% on the excess over $100,000. Prepare the adjusting entry for income taxes.

Deferred Tax Assets are created whenever taxes are paid on revenue transactions that will be reflected in future financial statement income.

A ----------increases the number of shares of stock outstanding and decreases the par value, or stated value, per share proportionally.

Selected transactions of the Hayward Corporation during 2019 and 2020 are given below. Record the transactions on page 6 of a general journal. Omit descriptions. 2019 Dec. 31 Recorded the adjusting entry for income tax expense. During 2019, quarterly deposits were made totaling $22,000 for the year. When the worksheet was prepared, the accountant estimated that the tax expense for the year would be $22,700. 2020 Mar. 15 Filed the income tax return for 2019. The actual tax for the year was $23,000. Apr. 15 Paid first quarterly installment of $6,200 for 2020 estimated income tax. May 12 Declared a dividend of $0.60 per share on the 20,000 shares of common stock outstanding. The dividend is payable on July 15 to stockholders of record on May 31. June 15 Paid second quarterly installment of $6,200 for 2020 estimated income tax. July 15 Paid dividend declared on May 12. Dec. 31 Recorded the adjusting entry for income tax expense. During 2020, quarterly deposits were made totaling $24,800 for the year. When the worksheet was prepared, the accountant estimated that the tax expense for the year would be $24,000.

The entry to record the declaration of a cash dividend consists of:

A corporation paid estimated income taxes of $57,500 during 2019. At the end of the year, the corporation's tax bill is computed to be $52,100. Record the entry to adjust the Income Tax Expense account on page 6 of a general journal. Omit the description.

The Dividends Payable accounts appear on the balance sheet as a current liability.

Under MACRS depreciation, a corporation may receive a tax benefit in the current year which is higher than the deduction reflected on the financial statements causing deferred taxes payable to increase.

The last closing entry for a corporation transfers the net income after income taxes from the Income Summary account to Retained Earnings.

A declaration and distribution of a 20 percent stock dividend on common stock will:

When the cumulative taxable income is higher than that reported on the financial statements, this gives rise to:

The Matt Tress Sofa Company has 11,000 shares of $2 par common stock outstanding. On August 22, 2019, a 3% stock dividend was declared to be distributed on September 30, 2019. The market value of the stock on August 22 was $21; the market value on September 30 was $18. What is the amount to be credited to the Paid-in-Capital in Excess of Par - Common Stock account on August 22?

A corporation reported a net income of $170,000 for its fiscal year and declared and paid cash dividends of $42,000 and declared and distributed a stock dividend recorded at $72,000. If the beginning balance of the Retained Earnings account was $200,000, the ending balance is:

Butler Corporation declared and issued a 8% stock dividend on December 1. Prior to the declaration, Butler's retained earnings were $735,000, shares outstanding were 62,000, $5 par value, common stock with a current market value of $16 per share. As a result of recording this stock dividend total stockholders' equity will increase (decrease) by: