Orion 11
When a company records the issuance of common stock above the par value for cash
- it credits the par value under Common Stock and the remaining amount under Paid-In Capital in Excess of Par Value -it debits the amount received under Cash
Under capital stock on the balance sheet, a company includes information about
- par value -number of shares authorized and issued. -shares outstanding for each class of stock.
A cash dividend becomes a binding legal obligation on the date of record
False
Dividends in arrears on cumulative preferred stock should be recorded as a current liability until they are paid.
False
Peters Company has $20,000 of dividends in arrears, which are considered to be liabilities
False
The paid-in capital section of the balance sheet consists of two classifications of capital stock and retained earnings.
False
Treasury stock should be reported in the financial statements of a corporation as an investment.
False
Which of the following statements is true about the stockholders' equity section in the balance sheet?
It will report paid-in capital and retained earnings and identify the specific sources of paid-in capital on the date of record.
In the stockholders' equity section of the balance sheet, additional paid-in capital appears under the sub-section
Paid-In Capital
________________ remain unaffected when retained earnings are restricted.
Total remained earnings
A company would NOT acquire treasury stock as an asset investment.
True
One of the major disadvantages of the corporate form of organization is its high tax regulation.
True
Preferred stock has contractual preference over common stock in certain areas.
True
The life of a corporation, as stated in its charter, may be perpetual or it may be limited to a specific number of years.
True
When a company declares a dividend, the declaration will change the total of stockholders' equity.
True
In published annual reports, the individual sources of additional paid-in capital
are often combined
What is indicated in the corporation's charter?
authorized stock
Additional paid-in capital can come from the excess of amounts paid in over par and stated value of
both preferred and common stock
Harrison Corporation issues 39,000 shares of $50 par value preferred stock for cash at $60 per share. The effects of the transaction above will be under both __________________ and additional paid-in capital sections.
capital stock
Hadley Corporation issued 200,000 shares of $5 par value common stock for $25 per share. During that year, the corporation sustained a net loss of $40,000. The year-end balance sheet would show
common stock of $1,000,000. *(200,000 x $5 = $1,000,000)
A&M Corporation began business by issuing 125,000 shares of $10 par value common stock for $20 per share. During its first year, the corporation sustained a net loss of $8,000. The year-end balance sheet would show
common stock of $1,250,000. *(125,000 x $10 = of $1,250,000)
The cause for occasional restriction of retained earnings?
contractual loan restrictions
When preferred stock is cumulative, preferred dividends not declared in a given period are called
dividends in arrears
Market value is ________________ reported for each class of stock on the balance sheet.
generally not
When a company purchases treasury stock, restricting retained earnings is a
legal restriction
Which of the following would appear on a balance sheet under the category additional paid-in capital?
paid-in capital in excess of stated value
The cumulative feature of ______________ gives the preferred stockholders the right to receive current-year dividends and unpaid prior-year dividends before common stockholders receive any dividends.
preferred stock
The ______________________ on common stockholders' equity is computed by dividing net income available to common stockholders (Net income - Preferred dividends) by average common stockholders' equity.
return
Which of the following has the right of residual claim upon liquidation of the corporation?
stockholders
Placing a restriction on retained earnings decrease total stockholders' equity.
will not