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Chapter 13: Q1SE_1 (page 708)

Question - Describing corporation characteristics

Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.

Requirements

1. Which advantage of incorporating is most applicable? What are other advantages of organizing as a corporate entity?

Short Answer

Expert verified

Answer

The company is considered as separate legal entity and have a perpetual succession. It does not allow its stockholders to be bonded by any contract and they have limited liability.

Step by step solution

01

Basic introduction-

Corporate entity: Entity structure established with the purpose of running a business and hold assets on the name of company and includes shareholder, directors, investors, and other stakeholders is known as corporate entity.

02

Most applicable advantage of incorporating and other advantages-

It does not permit stockholders to tie the business to an agreement.

There exists limited liability for stockholders.

The corporation has continuous life.

No mutual agency is found between the stockholders and the corporation.

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Most popular questions from this chapter

Identifying advantages and disadvantages of a corporation

Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.

e. Exposure to double taxation is evident.

On August 1, Hagino Corporation declared a $1.50 per share cash dividend on its common stock (20,000 shares) for stockholders on record as of August 15. Hagino paid the dividend on August 31. Journalize the entries declaring the cash dividend and paying the dividend.

Reporting earnings per share

Return to the ABC data in Short Exercise S13-12. ABC had 8,000 shares of common stock outstanding during 2018. ABC declared and paid preferred dividends of $4,000 during 2018.

Show how ABC reports EPS data on its 2018 income statement.

Computing dividends on preferred and common stock and journalizing

Northern Communications has the following stockholders鈥� equity on December 31,

2018:

Preferred Stock鈥�5%, \(11 Par Value; 150,000 shares authorized, 20,000 shares issued and outstanding

Paid-In Capital:

\) 220,000

760,000

Stockholders鈥� Equity

Paid-In Capital in Excess of Par鈥擟ommon 680,000

Total Paid-In Capital 1,660,000

Retained Earnings 200,000

Total Stockholders鈥� Equity \( 1,860,000

Common Stock鈥擻)2 Par Value; 575,000 shares

authorized, 380,000 shares issued and outstanding

Requirements

2. Record the journal entries for 2018, assuming that Northern Communications declared the dividend on December 1 for stockholders of record on December 10. Northern Communications paid the dividend on December 20.

What does earnings per share report, and how is it calculated?
See all solutions

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