ACCT 225 chapter 10

A distribution of a company's accumulated prior earnings is a(n)_______

dividend

The advantages to the corporate form of business include

ease of raising capital and transferability of ownership

Limited liability and ease of raising outside capital are advantages of this business form

corporation

double taxation is a disadvantage for

corporations

When common stock has a designated par value, and common stock is issued at an amount above par, which entry is recorded?

credit common stock for the par amount

Preferred stock:

is useful for raising capital without reducing common stockholders' control and generally does not have voting rights and has preference as to dividends.

The number of shares outstanding equals the number of shares______

issued minus in treasury

corporations raise capital by

issuing stock

a corporation is owned by

its shareholders

small stock dividend

less than 25% of the outstanding shares of stock

most important advantage to the corporate form of a business is

limited liability

In a corporation, the stockholders' potential loss is:

limited to the amount of the investment

A small stock dividend is valued at

market value

Historically, par value was considered to be

real value of the company's shares of stock

earned capital

retained earnings

Which of the following is included in the rights of common stockholders?

right to vote

convertible

shares can be converted to common stock

corporations may be _____ held or _____ held

publicly, privately

Dividends

When a corporation distributes assets of the company to its investors

Canton has 60,000 shares of $10 par stock issued and outstanding. Canton declares a 2-for-1 stock split but for convenience accounts for it as a 100% stock dividend. What is the par value per share and number of shares outstanding after the stock split?

$10 par; 120,000 shares

Daffy Duct, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. The journal entry to record this transaction includes:

$10,000 credit to Common stock $100,000 debit to Cash $90,000 credit to Additional paid-in capital

Daffy Duct, Inc. issued 10,000 shares of $1 par value common stock at $5 per share. The effect of this transaction on the accounting equation includes a:

$50,000 increase in total stockholders' equity and $50,000 increase in total assets.

AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals Blank______ shares.

100,000 shares (total number issued)

Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals Blank______ shares.

45,000

retained earnings

A company's past profits that are not paid out in dividends

When a corporation issues shares of common stock for an amount above par, which of the following entries occur?

Credit to additional paid-in capital and Credit to common stock

Stock dividend/Stock split

Distributions of stock to current shareholders of a corporation

cumulative

Dividends not declared during one year are payable when declared in subsequent periods

redeemable

Stocks can be turned in or re-purchased on demand

declaration date

The date on which a cash dividend becomes a liability to a corporation

record date

The date on which a company determines the registered owners of the stock who will receive a dividend

dividends in arrears

Unpaid dividends on cumulative preferred stock

An IPO is when

a private company goes public

Proceeds from issuing new par value common stock above par are credited to

additional paid in capital and common stock

paid-in capital

amount of money paid into a corporation by its owners

Cumulative preferred stock is entitled to receive current dividends plus dividends in _______, Correct Unavailable before any future common dividends can be paid.

arrears

The number of shares authorized is set forth in the company's:

articles of incorporation

why do corporations repurchase their stock

boost underpriced stock, distribute surplus cash without paying dividends, boost earnings per share, satisfy employee stock ownership plans

Preferred stock carries priority over common stock:

both for dividends and at dissolution

invested capital

common stock

Proceeds from issuing new par value common stock above par are credited to

common stock and additional paid in capital

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,

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

True or false: A corporation is owned by debt and equity holders.

false

No-par value stock is common stock that:

has not been assigned a par value

Preferred stockholders:

have the right to receive dividends only in the years the board of directors declares dividends.

IPO stands for

initial public offering

Disadvantages of the corporate form of business are

more paper work and additional taxation

are dividends payed on treasury shares?

no

Common stock that has not been assigned a par value is referred to as:

no-par stock

authorized shares

number of shares a company may sell

The legal capital per share of stock that is assigned when the corporation is first established is referred to as

par value

what decreases the par value of shares

stock split

treasury stock

stock that is repurchased by the issuing corporation.

cash dividends reduce_____

stockholders equity

Ima Rich purchased 100 shares of Stockits, Inc.'s $1 par value common stock for $5 per share. Which statement is true regarding the effect of this transaction on Stockits' financial statements?

stockholders equity on the balance sheet increases

declaration date

the date on which the board of directors announces the next dividend to be payed

Daffy Duct, Inc. issued 10,000 shares of no-par value common stock at $10 per share. Miss Hap, the bookkeeper, recorded the transaction with a $100,000 debit to Cash and $100,000 credit to Common stock. Which of the following is true?

the statement is correct

Daffy Duct, Inc. issued 10,000 shares of no-par value common stock at $10 per share. Miss Hap, the bookkeeper, recorded the transaction with a $100,000 debit to Cash and $100,000 credit to Common stock. Which of the following is true?

this entry is correct

Attracting outside investment is easier for corporations than for sole proprietorships and partnerships because:

transfer of ownership interest does not change the organization's operations and ownership interest can easily be transferred among individual investors

What types of companies frequently do not pay dividends?

unprofitable and growth companies

rights of common stockholders:

vote for corporate directors, rights to dividends when declared, distribution of assets in liquidation

stock dividend

when corporations distribute additional shares of their own stock to shareholders rather than cash