Chapter 14- Corporate Capital

Question 0

What is the journal entry to close the revenue accounts?

Answer 0

Service revenue

Retained earnings

Question 1

What are the three entries to record at year end for a corporation?

Answer 1

1. Close revenue accounts
2. Close operating expenses
3. Pay dividends to shareholders

Question 2

What is the journal entry to close the expense accounts?

Answer 2

Retained earnings

Operating Expenses

Question 3

What is the journal entry to pay dividends to shareholders?

Answer 3

Retained earnings

Dividends payable

Question 4

What is the journal entry to issue shares?

Answer 4

Cash

Common Shares

Question 5

What is the journal entry to record the settlement of legal fees by selling shares?

Answer 5

Legal fees expense

Common Shares

Question 6

What is the journal entry to record the issuing of preffered shares?

Answer 6

Cash

Preffered Shares

Question 7

How do you calculate the total due to preffered shareholders if dividends are 2 years in arrears?

Answer 7

Dividends in arrears:
Year ended 2012                   35000
Year ended 2013                   35000
Total dividends in arrears      70000
Dividends for current year     35000
Total dividends due to preffered shareholders                          105000

Question 8

What is the journal entry to record preffered shares being converted into common shares?

Answer 8

Preffered Shares

Common Shares

Question 9

What is the journal entry to record preffered shares being converted into common shares at a lesser value?

Answer 9

Preffered shares
Contributed capital in excess of stated value
Common Shares

Question 10

How do you calculate the book value per share?

Answer 10

1. Calculate preffered SHE (Legal capital+DIA)
2. Determine Common SHE (Total SHE-preffered SHE)
3. Determine BV per CS (Common SHE/# of common shares)

Question 11

How do you calculate Return on Equity?

Answer 11

Net income/average SHE