Acct. - Jackson - Ch. 11

A company issues 100,000 shares of preferred stock for $40 a share. The stock has a fixed annual dividend rate of 5% and a par value of $3 per share. Preferred stockholders can anticipate receiving a dividend of

-$15,000 each year

Treasury stock is reported in the balance sheet as

-A deduction in the stock holders' equity section

Stock Dividend

-A dividend that distributes additional shares of a corporation's own stock -Completely new stock -Journal Entry needed

Which of the following statements regarding a stock split is (are) true?

-A stock split does not decrease retained earnings -Stock splits do not require a journal entry

Stock Split

-An increase in the total number of authorized shares by a specified ratio; does not affect retained earnings -2-for-1 Stock -Journal Entry not needed

Par Value

-An insignificant value per share of capital stock specified in the charter

Which of the following represents the largest number of common shares?

-Authorized shares

No-Par Value Stock

-Capital stock that has no par value specified in the corporate charter

Which of the following is not an advantage of issuing bonds instead of common stock?

-Earnings per share on common stock may be lower

Treasury Stock

-Issued shares that have been reacquired by the company

Issued Shares

-Shares of stock that have been distributed by the corporation

Outstanding Shares

-Shares that are currently held by stockholders (not the corporation itself)

Growth Investment

-Stock bought by investors that pay little or no dividends, because companies that reinvest the majority of their earnings tend to increase their future earnings potential, along with their stock price

Income Investment

-Stock that consistently pay dividends -Example: Coca-Cola

Preferred Stock

-Stock that has specified rights over common stock

Each of the following is an advantage of the corporate form except:

-Taxation

Common Stock

-The basic voting stock issued by a corporation to stockholders

Payment Date

-The date on which a cash dividend is paid to the stockholders of record

Declaration Date

-The date on which the board of directors officially approves a dividend

Record Date

-The date on which the corporation prepares the list of current stockholders as shown on its records; dividends can be paid only to the stockholders who own the stock on that date -No Journal Entry needed on this date

Current Dividend Preference

-The feature of preferred stock that grants priority on preferred dividends over common dividends

Authorized Shares

-The maximum number of shares of capital stock of a corporation that can be issued, as specified in the charter

Cumulative Dividend Preference

-The preferred stock feature that requires current dividends not paid in full to accumulate for every year in which they are not paid. These cumulative unpaid amounts (called dividends in arrears) must be paid before any common dividends an be paid

A company sells 1,000 shares of common stock with a par value of $2 for $15 per share. To record the transactions, the company would record

Cash 15,000 Common Stock 2,000 Additional Paid-in Capital 13,000

Treasury stock is

-A corporation's own stock which it has repurchased