ACC CH10

two equity accounts

Common Stock at the par value or stated value per share and Additional Paid-in Capital for the portion above par or stated value

Declaring stock dividends and stock splits

Everyone has more shares, but each share is worth proportionately less than before.

. Retained earnings

Increases stockholders' equity.

What effect does a stock dividend have on total stockholders' equity

No effect on total stockholders' equity

The correct order from the largest number of shares to the smallest number of shares is:

Outstanding, issued, and authorized

Which of the following summarizes the changes in the balance in each stockholders' equity account over a period of time

The statement of stockholders' equity

The dividend yield measures how much

a company pays out in dividends in relation to its stock price

The primary disadvantages are

additional taxes and more paperwork.

Some preferred stock is cumulative, meaning

any dividends not declared in a given year accumulate to be paid in a later year

The stockholders' equity section of the balance sheet presents the balance of each equity account

at a point in time

The statement of stockholders' equity shows the change in each equity account

balance over time

Return on Equity is measured by

calculated as net income divided by average stockholders' equity

The payment of cash dividends

decreases Dividends Payable and decreases Cash

The declaration of cash dividends

decreases Retained Earnings and increases Dividends Payable

When we resell treasury stock, we report the

difference between its cost and the cash received as an increase or decrease in additional paid-in capital

The return on equity measures the ability to

generate earnings from the owners' investment

The net effect, then,

is a reduction in both Retained Earnings and Cash.

The primary advantages of the corporate form of business are

limited liability and the ability to raise capital

Earnings per share measures the

net income earned per share of common stock

Preferred stock has preference over common stock in

receiving dividends and in the distribution of assets in the event the corporation is dissolved

Entries for cash dividends are recorded on all of the following dates except

record date

The price-earnings ratio indicates how the

stock is trading relative to current earnings.

We include treasury stock in the

stockholders' equity section of the balance sheet as a reduction in stockholders' equity

If no-par value stock is issued

the corporation debits Cash and credits two equity accounts