S13.docx - S13-1 Requirement 1 Stockholders are not...

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S13-1 Requirement 1 Stockholders are not personally liable for the debts of the corporation. Other advantages of the corporate entity form include the following. A corporation: Does not allow stockholders to bind the business to a contract; lack of mutual agency Has an indefinite life Can raise more money than sole proprietorships and partnerships Makes transfer of ownership easy Attaches no personal liability for corporation debts to owners (stockholders) Attaches limited liability for corporation debts to stockholders Requirement 2 Some disadvantages of organizing as a corporation are: Ownership and management are often separated. Earnings of the corporation are subject to double taxation. Government regulation is expensive. Start-up costs are higher than other business forms.
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S13-2 Requirement 1 Date Accounts and Explanation Debit Credit Cash ($10 per share × 5,500 shares) 55,000 Common Stock—$4 Par Value ($4 per share × 5,500 shares) 22,000 Paid-In Capital in Excess of Par—Common ($6 per share × 5,500 shares) 33,000 Issued common stock at a premium. Requirement 2 Date Accounts and Explanation Debit Credit Cash 27,500 Preferred Stock—$5 Par Value ($5 per share × 5,500 shares) 27,500 Issued preferred stock at par. S13-3 Date Accounts and Explanation Debit Credit Mar. 13 Cash 50,000 Common Stock—No-Par Value ($5 per share × 10,000 shares) 50,000 Issued no-par common stock. S13-4 Date Accounts and Explanation Debit Credit July 7 Cash ($11 per share × 6,500 shares) 71,500 Common Stock—$3 Stated Value ($3 per share × 6,500 shares) 19,500 Paid-In Capital in Excess of Stated—Common ($8 per share × 6,500 shares) 52,000 Issued common stock at a premium.
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S13-5 Date Accounts and Explanation Debit Credit Building 160,000 Common Stock—$1 Par Value ($1 per share × 30,000 shares) 30,000 Paid-In Capital in Excess of Par—Common ($160,000 – $30,000) 130,000 Issued common stock in exchange for a building. S13-6 Requirement 1 Date Accounts and Explanation Debit Credit 2016 Dec. 1 Treasury Stock—Common ($6 per share × 1,800 shares) 10,800 Cash 10,800 Dec. 15 Cash ($9 per share × 300 shares) 2,700 Treasury Stock—Common ($6 per share × 300 shares) 1,800 Paid-In Capital from Treasury Stock Transactions ($3 × 300 shares) 900 Dec. 20 Cash ($2 per share × 700 shares) 1,400 Paid-In Capital from Treasury Stock Transactions 2,700 Retained Earnings 100 Treasury Stock—Common ($6 per share × 700 shares) 4,200 Requirement 2 Bottom Dollar Furniture, Inc. will report treasury stock beneath retained earnings on the balance sheet as a reduction to total stockholders’ equity. S13-7 Requirement 1 Date Accounts and Explanation Debit Credit 2016 Dec. 15 Cash Dividends ($2,560 + $48,750) 51,310 Dividends Payable—Preferred (2% × $128,000) 2,560 Dividends Payable—Common ($0.75 per share × 65,000) 48,750 Declared a cash dividend.
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S13-7, cont. Requirement 2 Date Accounts and Explanation Debit Credit 2017 Jan. 4 Dividends Payable—Preferred 2,560 Dividends Payable—Common 48,750 Cash 51,310 Payment of cash dividend.
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