Exam 1 Study Guide

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Exam 1 Study Guide

Study Guide for Test 1 on Ch 15 and 17

Study Guide
Illinois State University
Acc 232 - Intermediate Accounting II
Intermediate Accounting II Documents

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Exam # 1 Study Guide Chapters 15 & 17 Chapter 15 Sole Proprietorships- Partnerships- Corporations- Corporate form of organization characteristics:  File articles of incorporation in the state in which incorporation is desired  State will issue a corporate charter=recognizes company as a legal entity subject to state law  Company can operate in many states but only is incorporated in one state  Unlimited life  Limited liability  Charter-document with state that states what type business they are in  by-laws-important details of corporation Capital stock system  At least one class of common stock  Preferred stock  Each share represents ownership and carries rights to share proportionately in:  Profits and Losses  Management  Corporate assets if liquidated  Any new issues of stock of the same class (preemptive right) Common stock:  Residual equity-common stock gets what is left over after creditors and preferred stockholders have been paid  Par Value-an amount that has been stated as the Par Value of the common stock; stock cannot be issued for less than par value (if it is then the stockholder is liable for the difference) o If no Par Value: could have stated value (stated by board of directors) o Could also have no stated value Common stockholders:  Voting rights  Preemptive rights (be able to describe what this means)  Limited liability to the extent of their investment in the stock Journal Entries for Issuing Common Stock: Issued for $35, 18,000 shares With Par Value of $15 per share Cash ($35*18,000 shares) 630,000 Common Stock ($15*18,000 shares) 270,000 Paid in Capital in Excess of Par-Common Stock 360,000 ACC 232 1st Edition No Par Value (state value is the $35 it is issued for, so use that) Cash ($35*18,000 shares) 630,000 Common stock ($35*18,000 shares) 630,000 Stock has stated value of $20 per share Cash ($35*18,000 shares) 630,000 Common Stock ($20 stated value*18,000 shares) 360,000 Paid in capital in excess of Stated Value-common stock 270,000 Preferred Stock:  Get dividends and assets (in liquidations) before common stockholders  Can be any of the following: o Cumulative-any dividends not paid in prior years have to be paid before dividends can be paid to common stockholders, have a par value and a dividend %, or a stated dividend rate o Convertible-converted in to common stock at a specific rate o Callable –can be called for liquidation by the board of directors o Participative-dividend can be increased by the common stockholders getting dividends at a higher percentage of par value than the preferred stockholders Journal Entries for Issuing Preferred Stock: $35 Par Value, 18,000 shares With Par Value of $15 per share Cash ($35*18,000 shares) 630,000 Preferred Stock ($15*18,000 shares) 270,000 Paid in Capital in Excess of Par-Preferred Stock 360,000 Issue Preferred and Common Stock together: 1,500 shares of stock ($75 per share), $75,000 of bonds for $200,000  Proportional Method FMV of stock ($75*1,500 shares=112,500), FMV of bonds ($75,000), $112,500+ $75,000=$187,500 $75,000/187,500=.40 $200,000 allocated 60/40 Cash ...

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