chapter 11: stockholders' equity

has

preferred stock generally ____ preference as to dividends

date of record

stock records are finalized to determine which stockholders are to receive

declaration date

the board of directors officially approves a dividend

allow a company to be incorporated in a different state form the one in which it operates

the laws governing corporations

issued minus the number of shares in treasury

the number of shares outstanding equals the number of shares

corporation

the owners of a(n) _____ are not personally responsible for the debts of the business.

-subtracting preferred stock dividends from net income -subtracting the preferred stock balace from total stockholders' equity

when a company has both common and preferred stock, its ROE must be adjusted by

retained earnings are

-increased by net income -decreased by dividends -sometimes called earned capital -all of the company's earnngs kept rather than distributed to stockholders

-control is not diluted -interest payments on debt are tax deductible

Advantages of debt financing over equity financing are that:

100,000

AnnU, inc. sold 100,000 shares of the 1,000,000 shares it allowed to sell. AnnU repurchased 10,000 of these shares. The number of shares issued equals ____ shares

statement of retained earnings

Diva, Inc. declared and paid $10,000 of dividends. Dividends of $10,000 may be found on the

future stock prices

EPS is a good predictor of

-the dividend is greater than the amount of retained earnings -a creditor's loan agreement is violated

a corporation may be restricted from paying a dividend if

-was introduced to prevent bankrupt companies from unfairly distributing company resources -affects how common stock is recorded -has become less meaningful becasue states use other means to prevenet stockholders from removing capital from financially distressed companies

common stock's par value

stockholders' equity; balance sheet

contributed capital of $1,00,000 is found in the ____ section of the ____

the amount stockholders have invested in exchange for stock

contributed capital of $1,000,000 represents

arrears

cumulative preferred stock is entitled to receive current dividends plus " dividens in ____" before any future common dividends can be paid

stock dividends

require a journal entry

dividend

similar to a stock split, a stock _____ also distributes additional shares of stock to exisiting stockholders on a pro rata basis at no cost to the stockholders

provide incentives for employees to work harder

stock options are given to

-credit to dividends -debit to retained earnings

the closing entry required at year end, includes a

-decrease in retained earnings -decrease in stockholders' equity -decrease in cash

the declaration and payment of a cash dividend ultimately causes a(n)

balance sheet

transactions between a company and its stockholders affect the company's ____ account only

-a contra-equity account -the amount paid for stock reaccquired and currently held in treasury

treasury stock repress

-a residual claim on assets after creditors and preferred stockholders have been satisfied -the rights to receive dividends if they are declared -voting rights -a preemptive right to buy newly-issued stock before it is offered to others

what are the benefits of common stock?

corporation

what is a operate legal entity

dividends; payable

when Diva, inc., declared a $10,000 cash dividend, it recorded a debit to _____ and a credit to dividends _______

does not

A corporation _____ have a legal obligation to pay dividends

-common stock will be overstated -additional paid-in capital will be understated

Canton, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. Mr. Smart, the bookkeeper, recorded this transaction with a $100,000 debit to cash and a $100,000 credit to common stock. As a result of this entry:

-$100,000 credit to preferred stock -$10,000 credit to addional paid-in-capital- preferred -$110,00 debit to cash

Wyanot company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $100 cash per share. The journal entry to record this transaction includes a

does not reduce trained earnings, so it does not reduce the ability to declare a cash dividends in the future

a corporation's board of directors could prefer a stock split to a stock dividends because a stock split

owners

another term for stockholders is

stock splits

cause the par value per share to change

stock splits and stock dividends

cause total stockholders' equity to remain the same

shares of stock can be purchased in small amounts, so even small investors can participate

corporations can raise large amounts of money because

-are paid before dividends on common stock -may be paid at a fixed rate - aare more attractive than common stock dividens to investros who want a stable income

dividend on preferred stock

payment date

dividends payable is decreased

-selling the stock for more than its cost -receiving dividends

investors earn a return on stock investments by