Accounting Chapter 10

An accumulated deficit in retained earnings indicates that the company has what?

net losses

Which of the following accurately describes stockholder's equity? 1) amounts earned by the corporation 2) amounts repaid to investors 3) ownership interests of the shareholders 3) amounts owed to shareholders

3) ownership interests of the shareholders

Daffy Duck Inc. issues 10,000 shares of $1 par value common stock at $10 per share. The journal entry to record this transaction would include what?

$100,000 debit to cash $10,000 credit to common stock $90,000 credit to additional pain-in capital

The journal entry to record the declaration of a dividend includes _________.

1) a debit to dividends 2) a credit to dividends payable

Special contractually granted features can make preferred stock:

1) cumulative 2) convertible 3) redeemable

What occurs on the date of record?

A list of shareholders that are entitled to receive a dividend is made

The total number of shares available to sell as indicated in the company's articles of incorporation

authorized shares

Invested Capital =

common stock

Represents an ownership interest in the company

equity

Total number of shares of stock issued or sold to investors

issued shares

Only _______ common shares are eligible to receive dividends.

outstanding

The number of shares issued less treasury shares repurchased by the corporation

outstanding shares

A business that is organized, owned, and managed by one person and has unlimited liability is called what?

proprietorship

A company's past profits that are kept instead of being paid to stockholders are ________.

retained earnings

Dividends declared is closed into _________ _________ at the end of the fiscal year.

retained earnings

Earned Capital =

retained earnings

Distributions of stock to current shareholders of a corporation are called what type of distribution?

stock split or stock dividend

A corporation is owned by its ________.

stockholders

Shares of stock that are repurchased are referred to as what?

treasury stock

Dividends payable is decreased

payment date

The two types of corporations are?

public and private

Preferred stock carries priority over common stock when?

1) when dividends are declared and paid 2) when a corporation is liquidated

Stock records are finalized to determine which stockholders are to receive payment

date of record

Represents a creditor's interest that must be repaid

debt

The board of directors officially approves a dividend

declaration date

All privately held corporations are regulated by the Securities and Exchange Commission; true or false?

false

When a corporation issues shares of common stock for an amount above par, what journal entries occur?

1) credit to additional paid-in capital 2) credit to common stock

The declaration and payment of a cash dividend ultimately causes what?

1) decrease in cash 2) decrease in stockholder's equity 3) decrease in retained earnings

When common stock has a designated par value, and common stock is issued at an amount above par, what entry is recorded?

credit common stock for the par amount

A corporation ________ have a legal obligation to pay dividends.

does not

Companies usually rely on angel investors and venture capital firms following an initial public offering; true or false?

false

The number of shares outstanding equals the number of shares ________.

issued minus the number of shares in treasury

The most important advantage to the corporation form of business is?

limited liability

Assets ______ liabilities is equal to stockholders' equity.

minus

The statement of stockholder's equity reports what?

the changes in each shareholder equity account

A 2-for-1 stock split increases the marketability of a stock because...

the market price per share decreases

Identify the primary disadvantages of the corporation form of business compared to a sole proprietorship or partnership.

1) double taxation 2) more paperwork

Three traits that describe preferred stock?

1) has preferences as to dividends 20 generally does not have voting rights 3) is useful for raising capital without reducing common stockholders' control

The effect on the accounting equation of declaring a dividend that will be paid at a later date includes what?

1) increase in liabilities 2) decrease in stockholder's equity

Identify the primary advantages of the corporation form of business compared to a sole proprietorship or partnership.

1) limited liability 2) ability to raise capital

What are the sources of stockholder's equity?

1) paid-in capital 2) retained earnings

A distribution of assets to stockholders is referred to as what?

dividend