ACCT Ch. 18 SB

Which of the following accurately describes shareholders' equity?

Ownership interests of the shareholders

Preferred stock is similar to a bond when it has which of the following features?

a dividend rate a mandatory redeemable feature

Mandatorily redeemable preferred stock is reported as

a liability on the balance sheet.

Which of the following accounts might a corporation use to record changes in its ownership interests during a reporting period? (Select all that apply)

common stock accumulated other comprehensive income retained earnings

Knorr issues 1,000 shares of $2 par value common stock for $10 per share. The journal entry to record this transaction will include which of the following? (Select all that apply.)

credit to additional paid-in capital $8,000 credit to common stock $2,000

Justin Corp. issues 10,000 shares of $1 par value common stock for $5 per share. The journal entry to record this transaction will include which of the following? (Select all that apply.)

credit to common stock $10,000 credit to additional paid-in capital $40,000

If more than one class of shares is authorized, what type of information must be specified? (Select all that apply)

designation to distinguish each class specific rights for each class

A corporation with shares held by only a few individuals is referred to as:

privately held

True or false: A corporation is owned by debt and equity holders.

False

Net assets is

assets less liabilities.

A corporation is owned by its

shareholders

Who owns and controls a corporation?

shareholders

Net assets equals

shareholders' equity

Shareholders influence a company by

voting for the board of directors.

Which of the following is reported on the balance sheet?

Accumulated other comprehensive income

Consistent with U.S. GAAP, comprehensive income may be reported as

a separate statement immediately following the income statement an expanded version of the income statement

Carnival issues 10,000 shares of $1 par value common stock for $10 per share. Stock issue costs are $3,000. The journal entry to record the issuance of stock will include a credit to

additional paid-in capital for $87,000.

Shareholders' equity consists of which of the following items? (Select all that apply.)

amounts invested by shareholders amounts earned by the corporation

Amounts earned by the corporation on behalf of its shareholders are referred to as

retained earnings.

The Model Business Corporation Act

serves as the model for corporate laws in most states.

The ownership interests of the investors in a corporation are referred to as

shareholders' equity.

Other common terms for shareholders' equity include (select all that apply):

stockholders' equity stockholders' investment

Which type of stock usually has a high par value and a percentage of par value dividend rate?

Preferred stock

Who regulates the nature of shares that can be authorized, the issuance and repurchase of those shares, and the distributions to shareholders?

The state in which the corporation is incorporated

Retained earnings is typically reported on the balance sheet

as a single amount.

If preferred shares must be redeemed by a certain date, they should be classified as

debt.

Preferred stockholders usually have preference over common stockholders with respect to which items? (Select all that apply.)

distribution of assets in liquidation dividends

State laws regulate which of the following corporate activities? (Select all that apply.)

issuance of stock nature of share authorization repurchase of stock

Corporations raise capital by

issuing debt. operating at a profit. issuing stock

The two types of corporations are

profit and not-for-profit.

Items that under U.S. GAAP are reported under the heading of "accumulated other comprehensive income" would be reported by a IFRS-based entity under the heading of ____.

reserves

Which of the following are sources of shareholders' equity? (Select all that apply.)

retained earnings paid-in capital

Which of the following terms refer to the ownership interests of a corporation? (Select all that apply.)

stockholders' investment stockholders' equity shareholders' equity

Historically, par value was considered to be

the amount of net assets that were not available for distribution to shareholders.

Historically, par value indicated (select all that apply)

the issue price of all shares the amount of net assets that were not available for distribution to shareholders. the real value of shares

Which of the following may be a source of paid-in capital? (Select all that apply.)

Company sells stock to investors Company repurchases some of its outstanding common stock Share-based compensation activities

True or false: The balance sheet should disclose the sources of changes in the stockholders' equity accounts.

False

Which type of corporation is regulated by the Securities and Exchange Commission?

Public

When a company issues different classes of shares, it must

distinguish the rights for each class of stock.

Which item is included in shareholders' equity?

Retained earnings

The four classifications within shareholders' equity are

treasury stock. accumulated other comprehensive income. paid-in capital. retained earnings.

corporations have the limited liability of a corporation, but income and expenses are passed through the owners as in a partnership, avoiding double taxation.

S

Placid Corp. issues 1,000 shares of its $1 par value common stock in exchange for equipment. The book value of the equipment on the investor's books was $20,000, and its catalog list price was $23,000. The quoted market price of the stock in The Wall Street Journal was $22 per share. Which of the following entries will be included in the journal entry to record the issuance of the stock?

Credit additional paid-in capital $21,000.

Ragle Corp. issues 1,000 shares of its $5 par value common stock in exchange for equipment. The book value of the equipment on the investor's books was $40,000, and its catalog list price was $45,000. The equipment could be purchased in the market for $42,000. The stock was not publicly traded. Which of the following entries will be included in the journal entry to record the issuance of the stock?

Debit equipment $42,000.

______ represents the creditors' interest in the company, whereas ______ represents the investors' interest in the company.

Debt; equity

True or false: Treasury stock represents investments in treasury securities of the U.S. government.

False

True or false: When investors purchase shares of stock from a corporation, it is recorded by the corporation as investments in securities.

False

Brandon issues 1,000 shares of $5 par value common stock for $20 per share. Stock issue costs are $500. The journal entry to record the issuance of stock will include which of the following entries? (Select all that apply.)

Credit common stock $5,000. Credit additional paid-in capital $14,500. Debit cash $19,500.

Mars Inc. issues 5,000 shares of no par stock for $100,000. Which of the following entries are required? (Select all that apply.)

Credit common stock. Debit cash.

Which feature of preferred stock requires that, when a dividend is declared, all previous undeclared dividends must be paid on preferred stock?

Cumulative

The rights of common stockholders typically include which of the following? (Select all that apply.)

Right to distribution of assets in liquidation. Right to vote for corporate directors. Right to dividends when declared.

Which of the following are included in the rights of common stockholders?

Right to vote on certain matters.

Which of the following has limited liability for its owners, but passes income through to its investors and avoids double taxation?

S corporation

True or false: Comprehensive income may be presented as part of a combined income/comprehensive income statement, or separately immediately following the income statement.

True

Which of the following items are included in other comprehensive income? (Select all that apply.)

deferred gains and losses on derivatives gains and losses from amendments to postretirement programs net holding gains and losses on certain types of investments certain types of investments adjustments from foreign currency translations

A business that has equity accounts labeled "common stock" and "retained earnings" is a

corporation.

Disadvantages of the corporate form of business are (Select all that apply.)

double taxation. government regulation.

The most important advantage to the corporate form of business is

limited liability.

In a corporation, shareholders' liability is

limited to the amount of the investment.

Business Corporation Act is designed to serve as a guide for states in developing their corporate laws.

model

When investors purchase shares of stock, it is classified as

paid-in capital.

Shares of stock previously sold by the corporation that are repurchased are called

treasury stock.