Chapter 21 ("Corporate Earnings and Capital Transactions")

Question 1

Complete a worksheet for a corporation.

Answer 1

Step 1:
Enter the trial balance in the Trial Balance section.

Step 2:
Enter the adjustments (except the adjustment to income tax expense) in the Adjustments section of the worksheet.

Step 3:
Extend the balances of all income and expense amounts (except income tax expense)to the Income Statement section of the worksheet.

Step 4:
Compute income tax based on income before tax.

Step 5:
Total the columns in the Adjustments section.

Step 6:
Total the Debit and Credit columns of the Income Statement section.

Step 7:
Extend the adjusted balances of the asset, liability, and stockholders’ equity accounts to the Balance Sheet columns.

Question 2

FEDERAL INCOME TAX RATES

Answer 2

First $50k 15%
Next $25k 25%
Next $25k 34%
Next $235k 39%

See Internal Revenue Service publications for taxable incomes of more than $335,000.

Question 3

stock dividend

Answer 3

Distribution of the corporation’s own stock on a pro rata (比例して）basis that results in conversion of a portion of the firm’s retained earnings to permanent capital

Question 4

stock split

Answer 4

When a corporation issues two or more shares of new stock to replace each share outstanding without making any changes in the capital accounts

Question 5

appropriation of retained earnings

Answer 5

A formal declaration of an intention to restrict dividends

例）会社が新しい建物を建設する＝莫大なお金を要する＝株主の承諾を得てRetained Dividendsを減らさないといけない

Question 6

Donated capital

Answer 6

Capital resulting from the receipt of gifts by a corporation

Question 7

Treasury stock

Answer 7

A corporation’s own capital stock that has been issued and reacquired; the stock must have been previously paid in full and issued to a stockholder

Question 8

A liability for the payment of cash dividends is recorded

• on the date the board of directors publicly declares its intention to pay the dividends.
• only when cumulative preferred dividends are passed over (not paid) and are in arrears.
• at the end of any year during which common stock dividends were not paid.
• at the end of every year that the corporation makes a profit.

Answer 8

-on the date the board of directors publicly declares its intention to pay the dividends.

Question 9

The entry to record the distribution of a stock dividend includes a credit to Common Stock Dividend Distribution.
True
False

Answer 9

F

逆。stock dividendがdeclareされる時はCSDDがCreditされてRetainedEarningがｄebitされるけどdistributeされる時はCSDDをデビットしてCommon Stockをクレジット。

Question 10

The entry to record the declaration of a stock split includes a debit to Retained Earnings.
True
False

Answer 10

F

splitが発生する時は株の数が変わるだけで、何もデビット・クレジットする必要がない。

Question 11

Which of the following would be found on a corporation's income statement?
Retained Earnings
Income Tax Expense
Organization Costs
Dividends Payable

Answer 11

Income Tax Expense

Question 12

Deferred income taxes arise because the taxable income of a corporation can differ from the net income reported on its financial statements.
True
False

Answer 12

T

Deferred income taxes represent the amount of taxes that will be payable (or beneficial) in the future as a result of the difference between taxable income and income for financial statement purposes in the current and past years.

Question 13

Treasury stock is

• stock previously paid for in full by a stockholder, then repurchased by the issuing corporation.
• donated by stockholders.
• always preferred stock.
• categorized under Paid-in Capital on the balance sheet and added to preferred and common stock.

Answer 13

-stock previously paid for in full by a stockholder, then repurchased by the issuing corporation.

Question 14

Declarations of cash dividends and stock dividends are debited to the Retained Earnings account.
True
False

Answer 14

T

Question 15

Which of the following statements is not correct?

• Retained earnings represents a cash fund.
• A corporation can have a large cash balance but no retained earnings.
• A corporation can have a balance in the Retained Earnings account but no cash.
• Retained earnings represent the undistributed profits and losses of the corporation.

Answer 15

-Retained earnings represents a cash fund.

Question 16

An appropriation of retained earnings reduces the amount of retained earnings available for dividend declarations.
True
False

Answer 16

T

Question 17

A corporation reacquired 400 shares of its $100 par-value common stock for $105 a share. The entry to record this transaction includes a

• Debit to Treasury Stock—Common for $40,000.
• Debit to Treasury Stock—Common for $42,000.
• Credit to Paid-in Capital for Treasury Stock Transactions—Common for $40,000.
• Credit to Treasury Stock—Common for $42,000.

Answer 17

-Debit to Treasury Stock—Common for $42,000.

Question 18

A 3-for-2 stock split will triple the reported dollar amount of stockholders’ equity.
True
False

Answer 18

F

１．５倍になるはず。

Question 19

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

Answer 19

T

Question 20

When a corporation purchases its own stock and intends to reissue that stock at a later date, the cost of the shares is shown in the Assets section of the balance sheet until the stock is reissued.
True
False

Answer 20

F

（多分）Treasury StockはAssetではなくOwner’s Equityに記録されるから。

Question 21

Both cash dividends and stock dividends decrease the total stockholders’ equity.
True
False

Answer 21

F

A stock dividend does not change the total stockholders’ equity, nor does it change the percentage of ownership of any stockholder.

Question 22

Which of the following statements is not correct?

• Book value for each share of stock is the total equity applicable to the class of stock dividend by the number of shares issued.
• The total book value of a class of stock is increased after a stock dividend.
• The total book value of a class of stock is decreased after a stock dividend.
• All of the above statements are correct. In theory, a stock dividend should result in a proportionate reduction in each share’s market value.

Answer 22

All of the above statements are correct. In theory, a stock dividend should result in a proportionate reduction in each share’s market value.

Question 23

Retained earnings do not represent a cash fund.
True
False

Answer 23

T

It is important to remember that retained earnings does not represent a cash fund. Retained earnings are reinvested in inventory, plant and equipment, and various other types of assets. A corporation can have a large cash balance but no retained earnings. Conversely, it can have a large balance in the Retained Earnings account but no cash.

Question 24

An appropriation of retained earnings represents

• cash set aside for some designated purpose.
• a portion of retained earnings that is currently unavailable for dividends.
• a current liability of the corporation.
• a current asset of the corporation.

Answer 24

-a portion of retained earnings that is currently

Question 25

The income statement of a corporation and a sole proprietorship are similar with the exception of

• retained earnings.
• revenues reported.
• income taxes.
• total expenses of the corporation.

Answer 25

-income taxes.