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
