11. The Premier Corporation began operations on January 1, 2016 by issuing 10,000 shares of no-par stock for $22 per share. Indicate the effects of this transaction on the financial statements.
12. The Craig Corporation began operations on January 1, 2016 by issuing 5,000 shares of $6 par-value stock at $12. Indicate the effects of this transaction on the financial statements.
13. Taylor Bennett began his sole proprietorship on February 28, 2016 by contributing $25,000 of his own money to the business. Indicate the effects of this transaction on the financial statements.
14. Jim Caldwell and Pam Ennis, both CPAs, began their new partnership by each contributing $50,000 to their business. Indicate the effects of this transaction on the financial statements.
15. What is meant by "double taxation?" Which type of organizational form is more likely to be subject to double taxation?
16. Describe the varying degrees to which closely held corporations and publicly traded corporations are regulated.
17. Discuss some of the information items normally included in a corporation's articles of incorporation.
a. The name of the corporation and the proposed date of incorporation.
b. The purpose of the corporation.
c. The location of the business and its expected life.
d. Provisions for capital stock.
e. Names and addresses of the first board of directors.
18. Discuss a few of the characteristics of sole proprietorships, partnerships and corporations.
a. Sole Proprietorships are owned by one person and usually are fairly small. The owner is personally accountable for actions taken in the name of the business.
b. A partnership has the benefit of two or more people joining together to share their talents, their capital and the risks of business. Like proprietorships, the owners of partnerships are personally accountable for the actions taken in the name of the business. A partner is often responsible for the actions of the other partners as well.
c. Unlike proprietorships and partnerships, a corporation is designated as a separate legal entity by the state in which it is incorporated. The corporate form allows the potential of obtaining larger sums of capital than other forms. Other advantages of the corporate form are limited liability, continuity, transferability of ownership and professional management. Disadvantages include double taxation, excessive governmental regulation, and complexities in formation.
19. Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships and corporations.
a. The equity section of a proprietorship's balance sheet contains one account entitled "capital."
b. The equity section of a partnership also contains a "capital" account but for each partner.
c. The capital structure of corporations is more complex than proprietorships and partnerships. The stockholder's equity section of a balance sheet includes dollar amounts of the total par of the stock accounts as well as disclosure of other pertinent details such as number of shares authorized, issued and outstanding. In addition, the paid-in excess accounts are listed as well as retained earnings. Any appropriations are also listed with retained earnings and treasury stock, if applicable, normally reported last.
20. Which type of stock, common or preferred, must all corporations have?