Chapter 10: Stockholders' Equity

What accurately describes shareholders equity?

Ownership interests of the shareholders

Inc. issued 100,000 shares of the 1,000,000 shares authorized. Inc. has repurchased 10,000. the number of shares authorized represents the:

-maximum number of shares Inc is allowed to sell -maximum number of shares Inc is allowed to issue

Issued stock

the number of shares that have been sold to investors

Inc. repurchased 500 shares of its $2 par value common stock for $10,000. the journal entry to record this transaction includes:

-$10,000 credit to cash -$10,000 debit to treasury stock

treasury stock

-Corp's own stock that it has reacquired -Reasons: To boost underpriced stock to distribute surplus cash without paying dividends to boost earnings per share To satisfy employee stock ownerships to prevent hostile takeover

Treasury stock is reported in the financial statements as

a contra equity account

Retained earnings

the amount of earnings the corp has kept or retained--that is, the earnings not paid out in dividends

Paid-in capital

the amount stockholders have invested in the company

Outstanding Stock

number of shares held by investors

Only ______ common shares are eligible to receive dividends

outstanding

Stock dividend

Distributions of stock to current shareholders of a corporation

Journal entry to record declaration date on a dividend

Dividends Dividends payable

Payment date

Dividends payable is decreased

A frequent reason for a stock split is to

cause the market price per share to decline

Stock splits

cause the par value per share to change

Dividends

distributions by a corporation to its stockholders

Unpaid dividends on cumulative preferred stock are referred to as

dividends in arrears

When a corporation issues shares of common stock for an amount above par, what two accounts do we credit?

-Credit to additional paid-in capital -credit to common stock

Rich buys 100 shares, $1 par value common stock for $5 per share. What will be the effect of this transaction on the financial statements?

-Stockholders equity on the balance sheet increases -the financing activities section of the statement of cash flows increases

Declaration date

-The board of directors officially approves a dividend

Public Corporation

-allows public investment -many shareholders -stocks trade on stock exchanges or by over-the-counter (OTC) -Regulated by the (SEC) -EX. walmart, microsoft, intel

Date of Record

-also known as record date -the board of directors officially approves a dividend -stock records are finalized to determine which stockholders are to receive payment

How do investors earn a return on stock?

-dividends -selling when the prices are high

private corporation

-does not allow investment by the general public -fewer stockholders -stocks not traded in the open market -not regulated by SEC -Ex. cargill, koch industries (oil and gas), chrysler

AnuU sold 100,000 shares of the 1,000,000 it is allowed to sell. AnuU repurchased 10,000. The number of shares issued is

100,000 shares

Stock dividends require

a journal entry

The dividend payment date is when

cash is paid to satisfy the dividend liability Dividends payable XXX cash XXX

Assets _____ liabilities equals shareholders equity

less

I a corp, shareholders liability is

limited to the amount of the investment

An accumulated deficit in retained earnings indicates that the company has

net losses

Treasury stock

the corps own stock that it has reacquired

Authorized stock

the total number of shares available to sell, stated in the companies articles of incorporation.

Stock splits and stock dividends cause

total stockholders equity to remain the same