Chapter 11 Learnsmarts

when a company declared a $10,000 cash dividend, it recorded a debit to _______ and a credit to dividends __________

dividends, payable

preferred stock______________

has a preference as to dividends and is useful for raising capital without reducing common stockholders control

preferred stock is recorded as a

liability

when does a corporation record an increase in dividends payable?

on the declaration date

the journal entry to record the payment of a previously declared dividend includes

1. debit to dividends payable 2. credit to cash

items such as gains and losses from pensions, foreign currencies or financial investments are reported as

accumulated other comprehensive income

treasury stock is reported in the

equity section of the balance sheet

EPS is a good predictor of

future stock prices

no gain or loss is reported on the income statement form

treasury stock transactions

2 advantages of debt financing

1. control is not diluted 2. interest payments on debt are tax deductible

the number of shares outstanding equals the number of shares

issued minus the number of shares in treasury

number of shared authorized represents

max amount of shares allowed to issue

the dividend payment date is when

1. dividends payable is decreased 2. cash is decreased

a companies past profits that are kept instead of being paid to the stockholders are

retained earnings

dividends is closed into _____ ______ at the end of the fiscal year

retained earnings

the creation and oversight of all corporations are regulated by

state laws

contributed capital represents

the amount stockholders have invested in exchange for stock

what items would be under retained earnings in a statement of stockholders equity?

1. dividends: preferred 2. dividends: common 3. net income

a higher ROE means

1. the company used financial leverage to its stockholder's advantage 2. stockholders may enjoy financial returns

the owners of a _________ are not personally responsible for the debts of their business

corporation

the closing entry required at year end, includes a

debt to retained earnings, credit to dividends

dividends payable is recorded as a credit on the

declaration date

does a corporation have a legal obligation to pay dividends?

no