organization. Match each feature with an appropriate descriptive term,
and note whether this feature is an advantage or disadvantage of the
The ability of a company to
raise capital by issuing
shares to the public
The ability of an existing
shareholder to sell shares
without corporate approval
The ability of the
government to tax
corporate earnings and
Periodic regulatory filings
The ability of different
individuals to pool
The inability of creditors to
The life of the entity can
exceed the life of the
Cost of Regulation
2. Evaluate the following list, and decide if each described attribute more
likely relates to a common stock or preferred stock issue.
The stock is described as 6%,
The stock includes voting rights
The stock is last in line in the event
The stock is convertible
The stock ordinarily pays a fixed
The stock may be subject to
The stock has a "call price"
The stock has a mandatory
3. Prepare journal entries to record each of the following independent stock
Sherri Hui Corporation issued 100,000 shares of $1
par value common stock. The issue price was $30 per
Ariana Corporation issued 50,000 shares of no par
common stock for $10 per share.
Laser Golf issued 40,000 shares of $100 par value
preferred stock. The issue price was $102 per share.
Charleston Industries issued 5,000 shares of $5 par
value common stock for land with a fair value of
4. Krull Corporation presented the following selected information. The company
has a calendar year end.
Before considering the effects of dividends, if any, Krull’s net income for 20X7
Before considering the effects of dividends, if any, Krull’s net income for 20X8
Krull declared $750,000 of dividends on November 15, 20X7. The date of record
was January 15, 20X8. The dividends were paid on February 1, 20X8.
Stockholders’ equity, at January 1, 20X7, was $5,000,000. No transactions
impacted stockholders’ equity throughout 20X7 and 20X8, other than the impact of
earnings and dividends on retained earnings.
Prepare journal entries, if needed, to reflect the dividend declaration, the date
of record, and the date of payment.
How much was net income for 20X7 and 20X8?
How much was total equity at the end of 20X7 and 20X8?
Is total "working capital" reduced on the date of declaration, date of record,
and/or date of payment?