Lesson 14-1: Distributing Corporate Earnings to Stockholders

Accounting I Ch. 14 Reading Guide

ACCOUNTING I

Chapter 14 Reading Guide

Answer the following questions as you read Chapter 14, pages 402-431.

Lesson 14-1: Distributing Corporate Earnings to Stockholders

1.  / What is a stockholder?
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2.  / In a proprietorship, the owner’s accounts are listed under Owner’s Equity. For a corporation, what are the ownership accounts listed under?
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3.  / What is the title of the account where all Stock purchases are recorded?
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4.  / What is Retained Earnings?
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5.  / What are earnings that are distributed to stockholders called?
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6.  / The Dividends account is similar to what account in a proprietorship?
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What is the group called that is elected by stockholders to manage the corporation?
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8.  / What is term used when the Board of Directors decides to give part of the corporation’s earnings to stockholders? Is the Board of Directors obligated in paying the dividend?
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9.  / How would you classify Dividends Payable? What is its normal balance side? What side does the account increase on?
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10.  / Declaring a dividend is recorded in the General Journal. Why the General Journal and not the Cash Payments journal? (see FYI, page 407)
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11.  / Only one check is written when paying a dividend. If there are many stockholders, however, they should all be receiving payment. Why is only one check written by the corporation?
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Lesson 14-2: Beginning an 8-Column Worksheet

12.  / How should General Ledger accounts be listed on the Trial Balance?
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13.  / Why are the Trial Balance columns totaled?
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14.  / How is a worksheet for a merchandising business different than a worksheet for a service business?
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15.  / Adjustments on a worksheet are for planning purposes only. What does that mean?
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16.  / What are the four questions (or steps) to ask to calculate a Supplies adjustment?
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17.  / Why are letters such as a) or b) added to the adjustment?
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Lesson 14-3: Planning and Recording a Merchandise Inventory Adjustment

18.  / What is Merchandise Inventory?
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19.  / How is Merchandise Inventory classified? What is the normal balance side of this account?
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20.  / If an adjustment to inventory should decrease the Merchandise Inventory account, should you debit or credit that account?
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21.  / The beginning balance and ending balance for Merchandise Inventory will be the same (it will not change during the year). Why?
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22.  / What two accounts are used to adjust the Merchandise Inventory account?
23.  / Will Merchandise Inventory always be credited as an adjustment? Explain.
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Lesson 14-4: Planning and Recording an Allowance for Uncollectible Accounts

24.  / What are Uncollectible Accounts?
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25.  / Which accounting concept is being applied when recording an adjusting entry for Uncollectible Accounts Expense?
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26.  / Why should a business estimate what it thinks it will not be able to collect?
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27.  / What is a contra account?
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28.  / Allowance for Uncollectible Accounts is a contra account to which account?
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29.  / What is a book value?
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30.  / What is the formula to estimate uncollectible account expense, using the percentage method?
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31.  / What are other account titles that can be used other than Allowance for Uncollectible Accounts?
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Lesson 14-5: Planning and Recording Depreciation Adjustments

32.  / What are the two categories of assets that many businesses use? Give a definition for both.
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33.  / Give two examples of Plant Assets.
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34.  / What are the three major types of Plant Assets?
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35.  / What is depreciation expense?
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36.  / What three values are needed to calculate depreciation expense?
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37.  / Original cost is made up of all costs to make an asset useable. Besides the purchase price, what other costs can be included in original cost?
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38.  / What is Estimated Salvage Value?
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39.  / What two factors affect the useful life of a plant asset? Define both.
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40.  / What is the formula for straight-line depreciation?
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41.  / What is accumulated depreciation?
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42.  / If the original cost of an asset is $6,000 and the accumulated depreciation for that asset is $4,000, what is the book value?
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43.  / What two accounts are affected and how (debit or credit) when recording depreciation expense for Store Equipment?
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Lesson 14-6: Calculating Federal Income Tax and Completing a Work Sheet

44.  / When are Estimated Federal Income Taxes for a corporation paid?
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45.  / What two accounts are affected and how (debit or credit) when recording Federal Income Tax owed on a worksheet?
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46.  / What is the title of the additional column of a 10-column worksheet?
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