Acct 2301 Chapter 11 (McGraw Hill)

Identify the formula to compute basic earnings per share.

(Net income - preferred dividends)/weighted-average common shares outstanding

Mario Hernandez owns 25 shares of $100 par, 5% cumulative preferred stock. During the current year, no dividends are declared or paid. The unpaid amount of $ ____ is considered dividends in ____

125; arrears

Blink, Inc. has 1,000 shares of $10 par, 5% preferred stock, and 20,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $20,000 dividend, the payment to common shareholders will total $ ____

19,500

______ stock is the number of shares that a corporation's charter allows it to sell.

Authorized

Identify the advantages of the corporate form of business. (Check all that apply.)

Continuous life Ease of capital accumulation Limited liability of stockholders

Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries?

Credit to Common Stock, $1 par for $200. Debit to Cash for $200.

Blank______ preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Cumulative

Authorizing a cash dividend payment to investors requires three crucial dates. Identify which of the following is not a correct term to describe these dates.

Date of authorization

Ivers, Inc. purchased 100 shares of its own $10 par value common stock for $20 per share. The journal entry to record this transaction would include which of the following entries?

Debit to Treasury Stock; credit to Cash.

An advantage of purchasing preferred stock is that preferred shareholders are guaranteed to receive dividend payments each year.

False

Identify the disadvantages of the corporate form of business. (Check all that apply.)

Government regulation Corporate taxation

Identify which of the following is not generally a right of common stockholders.

Manage operations

Blank______ value stock is stock not assigned a value per share by the corporate charter. Its advantage is that it can be issued at any price without the possibility of a minimum legal capital.

No-par

Stockholders' equity, reported on the balance sheet, consists of which of the following accounts? (Check all that apply.)

Paid-in Capital Retained Earnings

John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts? (Check all that apply.)

Paid-in Capital in Excess of Par Value Common Stock

Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200 shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to record this transaction in the books of Damian, Inc., will include a credit to Blank______ in the amount of Blank______.

Paid-in Capital, in Excess of Par; $8,000

The market value per share is the price at which stock is bought and sold. Which of the following factors does not influence market value?

Par value

_____ has/have special rights that give it priority over other types of stock in one or more areas.

Preferred stock

On March 15, the board of directors of Richmond, Inc. declare a cash dividend of $1 per share. On March 15, there are 1,000 shares of stock issued and outstanding. The journal entry required on the date of declaration will include a debit to the Blank______ account.

Retained Earnings

The account that consists of a company's cumulative net income less any losses and dividends declared since its inception is called Blank______.

Retained Earnings

_____ value stock is no-par stock to which the directors assigned a certain value per share. This value becomes the minimum legal capital per share in this case.

Stated

______ value stock is no-par stock to which the directors assigned a certain value per share. This value becomes the minimum legal capital per share in this case.

Stated

Which of the following is not a reason that a corporation would issue preferred stock?

To obtain a tax advantage over corporations with no preferred stock

Long, Inc. purchased 50 shares of its own $10 par value common stock for $50 per share. The journal entry to record this transaction would include a debit to the ___ Stock account in the amount of $ ____

Treasury; 2500

Preferred stock can be issued to raise money without giving up control.

True

Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.

True

When all authorized shares of stock have the same rights and characteristics, the stock is called Blank______ stock.

common

On May 25, Tyler, Inc. issues 100 shares of $10 par value preferred stock for $5,000 cash. The entry to record this transaction would include a (debit/credit) Blank______ to the preferred stock account in the amount of Blank______.

credit; $1,000

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) _____ to the preferred stock account in the amount of $ ____

credit; 100

The board of directors authorizes a cash _____ or distribution of cash to its investors.

dividend

When stock is cumulative preferred stock and the board of directors does not declare a dividend, the unpaid dividend amount is called:

dividend in arrears.

Preferred stock usually carries a preference for dividends, meaning that:

dividends are allocated to preferred shareholders before they are issued to common shareholders

The amount of income earned per each share of a company's outstanding common stock is known as:

earnings per share

The Blank______ value per share is the price at which a stock is bought and sold.

market

A statement of stockholders' equity lists balances of: (Check all that apply.)

net income common stock shares retained earnings cash dividends

The Blank______ value of stock is an amount assigned per share by the corporation in its charter. In many states, this amount establishes the minimum legal capital, which refers to the least amount that the buyers of stock must contribute or be subject to paying at future dates.

par

A corporation is created by obtaining a charter from:

the state government

No-par value stock is stock not assigned a value per share by the corporate charter. Its advantage is that ___________.

there is no minimum legal capital

When a corporation purchases shares of its own stock, it is called Blank______ stock.

treasury

Stockholders have the right to ___at stockholders' meetings.

vote

In the computation of basic earnings per share, a company will use the Blank______.

weighted-average common shares outstanding

A Blank______ is the distribution of cash to its owners. This is determined by the board of directors.

cash dividend

A Blank______ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held. Multiple choice question.

corporation

On June 1, the board of directors of Dylan, Inc. declare a cash dividend of $1 per share. On June 1, there are 1,000 shares of stock issued and outstanding. The journal entry required on the date of declaration will include a (debit/credit) to the Common Dividend Payable account.

credit

Cameron, Inc. held 1,000 shares of its own $10 par value common stock purchased for $20 per share. In March, Cameron sold 10 shares at $20 per share. The journal entry to record the sale of treasury stock would include a (debit/credit) Blank______ to Treasury Stock in the amount of Blank______.

credit; $200

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) Blank______ to Common Stock for Blank______.

credit; $500

When the board of directors authorizes a cash dividend to investors, there are three important dates involved—the date of declaration, date of record, and date of

payment

Stock that typically includes preference for receiving dividends and for distribution of corporate assets during a liquidation is called (common/preferred) ____ stock.

preferred

Corporations can be separated into two types. A (privately/publicly) ___ held corporation does not offer its stock for public sale and usually has few stockholders. A (privately/publicly) _____ held corporation offers its stock for public sale and can have thousands of stockholders.

privately; publicly

A charter application usually must be signed by the prospective stockholders called incorporaters or ____ . Then, it is filed with the appropriate state official.

promoters

Vernon, Inc.'s charter did not assign a par-value to its authorized stock. However, Vernon's directors assigned a(n) Blank______ value per share. This value becomes the minimum legal capital per share in this case.

stated

The Blank______ lists the beginning and ending balances of key equity accounts and describes the changes that occur during the period.

statement of stockholders' equity

Two of the biggest disadvantages of the corporate form of business are government regulation and corporate

taxation