TRUE OR FALSE: 2. Door Company has 2 classes of common stock. Only the class A c
ID: 2449395 • Letter: T
Question
TRUE OR FALSE:
2. Door Company has 2 classes of common stock. Only the class A common stockholders are entitled to vote.
Requirement A: Record the issuance of the class A common stock for cash. Use the Door account titles (additional paid in capital, cash, class A common stock, class B common stock, retained earnings)
ACCOUNTS DEBIT CREDIT
__________ ______ _______
Requirement B: Record the issuance of the class B common stock for cash. Use the Door account titles.
ACCOUNTS DEBIT CREDIT
__________ ______ _______
Requirement C: How much of Door's stockholders' equity was contributed by the stockholders? How much was provided by profitable operations? Does this division of equity suggest that the company has been successful?
The stockholders contributed $_____ to stockholders' equity and $____ was provided by profitable operations. This division suggests that the company ____ (has, has not) been successful because most of its stockholders' equity has come from ______ (the stockholders, profitable operations).
Requirement 4: Write a sentence to describe what Door's stockholders' equity means.
Door's stockholders' equity of $____ means that the company's stockholders own $____ of the business's assets.
a. The policymaking body in a corporation is called the board of directors. b. The owner of 100 shares of preferred stock has greater voting rights than the owner of 100 shares of common stock. c. Parvalue stock is worth more than nopar stock. d. Issuance of 1,000 shares of $5 parvalue stock at $12 increases contributed capital by $12,000.Explanation / Answer
a. True. Board of directors are those who frame the policies of the company.
b. False. The owner of 100 shares of common stock has greater voting rights than the owner of 100 shares of preference stock.
c. True. Par-Value stock is worth more than no-par stock.
d. False. Issuance of 1,000 shares of $5 par-value stock at $12 increases contributed capital by $5,000 only remaining amount is treated as additional-paid-in capital.
e. True. The issuance of no-par stock with a stated value is fundamentally different from issuing par-value stock.
f. False. A corporation issues its preferred stock in exchange for land and building with a combuned market value of $200,000. This transaction does not increases the corporation's owner's equity by $200,000 regardless of the assets' prior book values.
g. False. Common stock is much riskier investment when compared to preffered stock
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