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Exam 21: Corporate Earnings and Capital Transactions

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Question 31

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

A) True
B) False

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Question 32

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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.

A) True
B) False

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Question 33

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

To be entitled to receive a cash dividend, an investor must be listed as an owner of the stock on the ____________________ date.

The following information was taken from the accounting records of the Gemini Corporation on December 31, 2013. Using this information, prepare the Stockholders' Equity section of the corporation's balance sheet.

After all revenue and expense accounts, other than Income Tax Expense, have been extended to the Income Statement section of the worksheet of Carlton Corporation, the net income is determined to be $75,000. Using the following corporate income tax rates, compute the corporation's federal income taxes payable. (Assume that the firm's taxable income is the same as its income for financial accounting purposes.) $\begin{array} { l l } \text { Taxable Income } & \text { Tax Rate } \\\hline \text { First } \$ 50,000 & 15 \text { percent } \\\text { Next } \$ 25,000 & 25 \text { percent } \\\text { Next } \$ 25,000 & 34 \text { percent } \\\text { Next } \$ 235,000 & 39 \text { percent } \\\text { Over } \$ 335,000 & \text { See IRS publications }\end{array}$

The cost of treasury stock is deducted from the sum of all items in the ____________________ section of the balance sheet.

After all revenue and expense accounts, other than Income Tax Expense, have been extended to the Income Statement section of the worksheet of Tyler Corporation, the net income is determined to be $50,000. Using the following corporate income tax rates, compute the corporation's federal income taxes payable. (Assume that the firm's taxable income is the same as its income for financial accounting purposes.) $\begin{array} { l l } \text { Taxable Income } & \text { Tax Rate } \\\hline \text { First } \$ 50,000 & 15 \text { percent } \\\text { Next } \$ 25,000 & 25 \text { percent } \\\text { Next } \$ 25,000 & 34 \text { percent } \\\text { Next } \$ 235,000 & 39 \text { percent } \\\text { Over } \$ 335,000 & \text { See IRS publications }\end{array}$

An appropriation of retained earnings represents

A corporation has paid estimated income taxes of $9,000 during the year 2013. At the end of the year, the corporation's tax bill is computed to be $10,000. Record the entry to adjust the Income Tax Expense account on page 6 of a general journal. Omit the description.

The entry to record the payment of a cash dividend includes a debit to Retained Earnings and a credit to Cash.

Information from the Income Statement columns of Lincoln Corporation's worksheet on December 31, 2013, is shown below. $\begin{array}{lr}\text { Sales } & \$ 920,000 \mathrm{Cr} . \\\text { Purchases } & 620,000 \mathrm{Dr} . \\\text { Selling Expense } & 140,000 \mathrm{Dr} . \\\text { Income Tax Expense } & ?\\\text { General and Administrative Expense } & \$ 90,000 \mathrm{Dr} \\\text { Amortization of Organization. Costs } & 600 \mathrm{Dr} . \\\text { Income Summary } & 170,000 \mathrm{Dr} \\\text { Income Summary } & 210,000 \mathrm{Cr} .\end{array}$ 1. What is the amount of net income before income tax? 2. What is the amount of income tax on the net income? Use the tax rates set forth below. 3. What adjustment is recorded for Income Tax Expense? The corporation paid $21,000 through quarterly deposits. 4. What is the amount of net income after income tax? $\begin{array} { l l } \text { Taxable Income } & \text { Tax Rate } \\\hline \text { First } \$ 50,000 & 15 \text { percent } \\\text { Next } \$ 25,000 & 25 \text { percent } \\\text { Next } \$ 25,000 & 34 \text { percent } \\\text { Next } \$ 235,000 & 39 \text { percent } \\\text { Over } \$ 335,000 & \text { See IRS publications }\end{array}$

Information from the Income Statement columns of Leland Corporation's worksheet on December 31, 2013, is shown below. $\begin{array}{lr}\text { Sales } & \$ 460,000 \mathrm{Cr} \\\text { Purchases } & 310,000 \mathrm{Dr} \\\text { Selling Expense } & 70,000 \mathrm{Dr} \\\text { Income Tax Expense } & ?\\\text { General and Administrative Expense } & \$ 45,000 \mathrm{Dr} \text {. } \\\text { Amortization of Organization Costs } & 300 \mathrm{Dr} \text {. } \\\text { Income Summary } & 85,000 \mathrm{Dr} \\\text { Income Summary } & 105,000 \mathrm{Cr} \text {. }\end{array}$ 1. What is the amount of net income before income tax? 2. What is the amount of income tax on the net income? Use the tax rates set forth below. 3. What adjustment is recorded for Income Tax Expense? The corporation paid $8,400 through quarterly deposits. 4. What is the amount of net income after income tax? $\begin{array} { l l } \text { Taxable Income } & \text { Tax Rate } \\\hline \text { First } \$ 50,000 & 15 \text { percent } \\\text { Next } \$ 25,000 & 25 \text { percent } \\\text { Next } \$ 25,000 & 34 \text { percent } \\\text { Next } \$ 235,000 & 39 \text { percent } \\\text { Over } \$ 335,000 & \text { See IRS publications }\end{array}$

Match the accounting terms with the description by entering the proper number.

Information from the Income Statement columns of King Corporation's worksheet on December 31, 2013, is shown below.

Which of the following statements is not correct?

A corporation has paid estimated income taxes of $57,500 during the year 2013. 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 entry to record the declaration of a cash dividend consists of a debit to

On the date of declaration of a stock split, a(n) ____________________ notation is recorded in the general journal.

On August 10, 2013 a corporation received a donation of land for a future plant site. The land has a fair market value of $800,000. Record the entry to reflect the receipt of this asset as a gift on page 3 of a general journal. Omit the description.