ACC chapter 18 smart book

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a restriction of retained earnings

-indicates managements intention to withhold assets for a specified purpose -communicates the portion of retained earnings not available for dividends

state laws regulate which of the following corporate activities

-nature of share authorization -repurchase of stock -issuance of stock

preferred stock is similar to a bond when it has which of the following features

-a dividend rate -a mandatory redeemable feature

when a company issues its shares of stock for a noncash asset, which of the following may provide evidence of fair value of the transaction

-an independent appraisal of the value of the asset -the quoted market price for the shares -the amount of cash that would be paid to purchase the asset

In year 1, Boise purchased 10,000 shares of treasury stock for $5 per share. In year 3, Boise reissued 1,000 shares of treasury stock for $8 per share. The journal entry to record the transaction in year 3 will include

-credit to paid in capital from treasury stock for $3000 -credit treasury stock for $5000

if more than one class of shares is authorized, what type of information must be specified

-designation to distinguish each class -specific rights for each class

corporations raise capital by

-issuing stock -operating at a profit -issuing debt

which of the following has limited liability for its owners but passes income through to its investors and avoids double taxation

S corporation

mandatorily redeemable preferred stock is reported as

a liability on the balance sheet

which account is a stockholders equity account

additional paid in capital

How should cash dividends be reported on the statement of shareholders' equity?

as a reduction of retained earnings

how should cash dividends be reported on the statement of shareholders equity?

as a reduction of retained earnings

which is subject to double taxation

corporations

ex- dividend date

date before which investors must purchase stock in order to receive a dividend

record date

date that a determination is made as to recipients of a dividend

payment date

date that corporate assets are transferred to shareholders

declaration date

date that the corporate board of directors announces a dividend

when a company issues different classes of shares it must

distinguish the rights for each class of stock

when a corporation distributes assets of the company to its investors, it is referred to as a(n)

dividend

a liquidating dividend means that

dividends exceed retained earnings

when a corporation repurchases its stock as treasury stock, the number of shares authorized _____

does not change

the balance sheet should disclose the sources of changes in the stockholders equity account

false

when stock splits or stock dividends result in fractional shares, the situation is handled by

issuing cash payments for the fractional shares

in a corporation, shareholders liability is

limited to the amount of the investment

the return on shareholders equity ratio is computed by dividing

net income by average shareholders equity

which type of stock usually has a high par value and percentage of par value dividend rate?

preferred stock

the effect of share issue costs is to

reduce paid in capital in excess of par

when a corporation repurchases its stock as treasury stock, the number of shares issued ______

remains the same

balance sheet

reports amounts of shareholders equity at end of reporting periods

statement of stockholders equity

reports sources of the changes in stockholders equity accounts

a corporations accumulated, undistributed net income or loss is referred as

retained earnings

amounts earned by the corporation on behalf of its shareholders referred to as

retained earnings

if a company wishes to increase its stock prices it might declare an ____ stock split

reverse

the ownership interests of the investors in a corporation are referred to as

shareholders equity

which type of dividend does not reduce the assets of the firm or create a liability?

stock dividend

the costs for legal, promotional and accounting services to issue stock should be

subtracted from the proceeds of issuing stock

historically, par value was considered to be

the amount of net assets that were not available for distribution to shareholders

when a corporation issues two securities for a single price and the market value of only one security is known, how is the cash received allocated

the cash received is allocated first to the security for which the fair value is known, and the remainder is allocated to the other security

when a company repurchases its stock and immediately retires the stock, which of the following occurs?

the equity accounts are reduced for the amount in which the shares were originally sold

if a corporation issues its shares of stock for noncash asset, at which amount should the transaction be recorded?

the fair value of the stock

shares of stock previously sold by the corporation that are repurchased are called

treasury stock

when does a dividend become a liability to a corporation

when it is declared by the board of directors

A company originally issues par value common stock at an amount above par. Subsequently, the company reacquires the shares for more than the issue price and immediately retires the shares. The company has no previous transactions for stock repurchases. Which of the following accounts would be reduced for the repurchase and retirement of the shares?

-paid in capital in excess of par -retained earnings -common stock

who regulates the nature of shares that can be authorized, the issuance and repurchase of those shares, and the distribution to shareholders

the state in which the corporation is incorporated


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