1. 14.1 Your corporation needs additional capital to fund an expansion. Discuss the advantages and
disadvantages of raising capital through the issuance of stock. Would debt be a better option? Why or why
not?
2. 14.1 How many shares of stock should your new corporation authorize? How did you arrive at your
number?
3. 14.1 What factors should a new company consider in deciding in which state to incorporate?
4. 14.1 What are some of the reasons a business owner might choose the corporate form of business?
5. 14.2 Why would a company repurchase its own stock?
6. 14.2 The following data was reported by Saturday Corporation:
• Authorized shares: 30,000
• Issued shares: 25,000
• Treasury shares: 5,000
How many shares are outstanding?
7. 14.2 A corporation issues 6,000 shares of $1 par value stock for a parcel of land valued at $12,000.
Prepare the journal entry to reflect this transaction.
8. 14.2 When corporations issue stock in exchange for professional services, what account(s) should be
debited and what account(s) should be credited?
910 Chapter 14 Corporation Accounting
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9. 14.2 A corporation issues 5,000 shares of $1 par value stock for some equipment with a clearly
determined value of $10,000. Prepare the journal entry to reflect this transaction.
10. 14.3 On April 2, West Company declared a cash dividend of $0.50 per share. There are 50,000 shares
outstanding. What is the journal entry that should be recorded?
11. 14.3 Assuming the same facts as Exercise 59., what is the journal that should be recorded on May 5, the
date of payment?
12. 14.3 When does a corporation incur a liability for a dividend?
13. 14.3 How does a stock split affect the balance sheet of a corporation?
14. 14.4 Your friend has questions about retained earnings and dividends. How do you explain to him that
dividends are paid out of retained earnings?
15. 14.4 What does owners’ equity mean for the owner?
16. 14.4 What types of transactions reduce owner’s equity? What types of transactions reduce retained
earnings? What do they have in common?
17. 14.4 Sometimes financial statements contain errors. What type of liabilities may need correction as a
prior period adjustment?
18. 14.4 Retained earnings may be restricted or appropriated. Explain the difference between the two and
give an example of when each may be used.
19. 14.5 Which financial statements do you need to calculate EPS?
20. 14.5 Where is EPS disclosed for publicly traded companies?
21. 14.5 Should investors rely on EPS as an investing tool? Why or why not?
22. 14.5 What information do you need to calculate the weighted average common shares outstanding?
23. 14.5 Which is the only ratio required to be reported on the face of a company’s financial statements?
What are the two ways the ratio is required to be reported?