acct c13 exam 2
issued
_____ stock that has been issued or sold to stockholders
authorized
________ stock is the number of shares that a corporation's charter allows it to sell. The number of these shares usually exceeds the number of shares issued (and outstanding), often by a large amount.
Stockholders' Equity
common stock and retained earnings
quest has 10,000 shares of $10 par value stock outstanding. on dec 31, they declared a 10% stock dividend, when the stock was selling for $15 per share. the stock will be distributed to stockholders on jan 20. prepare dec 31 entry, declared 1,000 share (10%) stock dividend
dec 31 DR retained earnings for 15,000 CR common stock dividend distributable 10,000 CR paid-in capital in excess of par value 5,000 10,000 x 10% = 1,000 x $15 = 15,000 1,000 x $10 par = $10,000
on jan. 9, a $1 per share cash dividend is declared on mery co's 5,000 common shares outstanding. the dividend will be pain on feb 1 to stockholders of record on jan 22. record payment of cash to stockholders
feb 1 DR common dividends payable 5,000 CR cash 5,000
retained earnings
is an account that consists of a company's cumulative net income minus any net losses and dividends declared since the company started operating
Price Earnings Ratio
market value (price) per share/earnings per share -reveals info about the stock market's expectations for a company's future growth in earnings, dividends, and opportunities
book value per share
reflects the amount of stockholders' equity applicable to common shares on a per share basis stockholders' equity applicable to common shares/number of common shares outstanding
vote
stockholders have the right to _____ at stockholders' meetings
market price
the amount that each share of stock will sell for in the market
dividend yield
the annual amount of cash dividends distributed to common stockholders relative to the stock's market price annual cash dividends per share/market value per share
to pay a cash dividend, the corp must have:
- a sufficient balance in retained earnings - the cash necessary to pay the dividend
Board of Directors Responsibilities
1. Setting corporate strategy, overall direction, mission, or vision 2. Hiring and firing the CEO and top management 3. Controlling, monitoring, or supervising top management 4. Reviewing and approving the use of resources 5. Caring for shareholder interests
Three dividend dates
1. declaration date - record liability for dividend 2. date of record - no entry required 3. payment date - record payment of cash to stockholders
stock
A _______ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.
corporation
A ___________ 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. -has rights and privileges -publicly held = Facebook, Google, Home Depot -privately held = wawa
promoters
A charter application usually must be signed by the prospective stockholders called incorporaters or . Then, it is filed with the appropriate state official.
treasury stock
A corporation's own stock that has been reacquired by the corporation and is being held for future use. can be used to: - use shares to buy other companies - avoid a hostile takeover - reissue to employees as compensation - support the market price contra equity - debit balance
cash dividends net income retained earnings common stock shares
A statement of stockholders' equity lists balances of:
split
A stock __________ is the distribution of additional shares to stockholders according to their percent ownership. When this occurs, the corporation "calls in" its outstanding shares and issues more than one new share in exchange for each old share.
credit; 150
Avery, Inc. held 100 shares of its own $10 par value common stock purchased for $15 per share. On December 1, Avery sold 10 shares at $15 per share. The journal entry to record the sale of treasury stock would include a (debit/credit) _______ to Treasury Stock in the amount of $ ______
19,500
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 $
stock dividend
a distribution of a corporation's own shares to its stockholders without receiving any payment in return - can be used to keep the market price on the stock affordable - can provide evidence of management's confidence that the company is doing well
stock splits
a distribution of additional shares of stock to stockholders according to their percent ownership
preferred stock
a separate class of stock, typically having priority over common shares in dividend distributions + distribution of assets in case of liquidation - has a stated dividend rate - normally has no voting rights
par value
arbitrary amount assigned to a share of stock when it is authorized
organization costs
Costs incurred in the formation of a corporation, including legal and state fees and promotional expenditures.
small stock dividend
Stock dividend that is 25% or less of a corporation's previously outstanding shares.
Credit to Common Stock for $50. Debit to Cash for $500. Credit to Paid-In Capital, in Excess of Stated Value for $450.
Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share. Vanya sells 50 shares of stock at its initial offering for $10 per share. The journal entry to record this transaction will include which of the following entries?
To obtain a tax advantage over corporations with no preferred stock
Which of the following is not a reason that a corporation would issue preferred stock? To raise capital without sacrificing control To obtain a tax advantage over corporations with no preferred stock To appeal to certain investors who want less risk To boost the return earned by common stockholders
$2,500 10,000 shares x $5 x .05 = $2,500.
Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $15,000 dividend, the payments to preferred shareholders will total _________.
preferred stock
_________ has/have special rights that give it priority over other types of stock in one or more areas.
cash dividend
a cash distribution of earnings by a corporation to its shareholders - a return to investors + always affect the stock's market value
$7,125 (9,500 .x .75 NO PERCENT HERE)
a company's board of directors votes to declare a cash dividend of .75 per share. the total company has 15,000 shares authorized, 10,000 issued and 9,500 shares outstanding. the total amount of the cash dividend is __
Corporations advantages and disadv.
adv 1. separate legal entity 2. limited liability of stockholders 3. transferable ownership rights 4. continuous life 5. lack of mutual agency for stockholders 6. ease of capital accumulation disadv 1. governmental regulation 2. corporate taxation
To reduce the market value of the common shares outstanding
Corporations purchase and hold their own stock, known as treasury stock, for several reasons. Identify which of the following is not a reason that a corporation would buy treasury stock. To reissue them to employees To show management confidence in the price To reduce the market value of the common shares outstanding To use their shares to acquire another corporation
issued 1,000 shares of no-par value stock for $40 per share
D cash for 40,000 CR common stock, no-par value 40,000
Debit cash 200 and credit common stock, $1 par for 200
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? (Check all that apply.)
weighted-average common shares outstanding
In the computation of basic earnings per share, a company will use the _____.
Debit to Treasury Stock; credit to Cash.
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?
Jan 10: the board declared a $0.10 cash dividend per share to shareholders of record on jan 28 Feb 15: paid the cash dividend declared on jan 10 Mar 31: declared a 20% stock dividend. the market value of the stock is $18 per share May 1: distributed the stock dividend declared on march 31 Dec 1: declared a 40% stock dividend. the market value of the stock is $25 per share Dec. 31: distributed the stock dividend declared on dec. 1
Jan 10: DR retained earnings (200 shares x $0.10) 20 CR common dividend payable 20 Jan 28: no journal entry on the date of record Feb 15: DR: common dividend payable 20 CR cash 20 Mar. 31 DR retained earnings (200 shares x 20% = 40 shares x $18 mkt) 720 CR common stock dividend distributable (40 shares x $10 par) 400 CR paid-in capital in excess of par value, common stock 320 May 1: DR common stock dividend distributable (40 shares x $10 par) 400 CR common stock, $10 par value (40 shares x $10 par) 400 Dec 1: DR retained earnings (240 shares x 40% = 96 shares x $10 par) 960 CR common stock dividend distributable (96 shares x $10 par) 960 Dec. 31: DR common stock dividend distributable (96 shares x $10 par) 960 CR common stock, $10 par value (96 shares x $10 par) 960
on jan. 9, a $1 per share cash dividend is declared on mery co's 5,000 common shares outstanding. the dividend will be pain on feb 1 to stockholders of record on jan 22. record liability for dividend
Jan. 9 DR retained earnings 5,000 CR common dividend payable 5,000 5,000 = 5,000 shares x $1
Paid-in Capital, in Excess of Par; $8,000
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 _________ in the amount of _______.
treasury
Keys, Inc. purchased 100 shares of its own common stock for $10 per share. The stock is now classified as ______ stock, a contra equity account, reported on the statement of stockholder's equity.
Treasury; 2500
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 _________.
stock split
Mario, Inc. declares a 2-for-1 stock ____. This means that Mario will "call in" its outstanding shares and issue two shares in exchange for each old share of stock.
credit; 1000
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) ________ to the preferred stock account in the amount of _______.
cumulative preferred stock
Preferred stock on which undeclared dividends accumulate until paid; common stockholders cannot receive dividends until cumulative dividends are paid.
credit, 500
Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a (debit/credit) ________ to Common Stock, $ _______
large stock dividend
Stock dividend that is more than 25% of the previously outstanding shares.
preemptive right
Stockholders' right to maintain their proportionate interest in a corporation with any additional shares issued. The right of common stockholders to purchase their proportional share of any common stock later issued by a corporation
statement of stockholders' equity
The _____ lists the beginning and ending balances of key equity accounts and describes the changes that occur during the period.
earnings per share
The amount of income earned per each share of a company's outstanding common stock
stock dividend
The board of directors of Visor, Inc. authorize a _________, a distribution of additional shares of the corporation's own stock, to existing shareholders.
True
True or false: Preferred stock can be issued to raise money without giving up control.
outstanding shares
the total number of shares of stock that are owned by stockholders on any particular date
noncumulative preferred stock
undeclared dividends from current and prior years do not have to be paid in future years
issue preferred stock for cash 50 shares of $100 par value preferred stock for $6,000 cash
D cash $6000 CR preferred stock, $100 par value $5,000 CR Paid-In Capital in excess of par value, preferred stock $1,000
a corporation issued 80 shares of $5 par value common stock for $700 cash
D cash 700 CR common stock $5 par value (80 shares x 5) 400 CR Paid-in Capital in Excess of Par Value, Common Stock for 300
issue par value at a premium; issued 30,000 shares of common stock issued 30,000 shares of $10 par value stock for $12 per share 360,000 = 30,000 shares x $12 *the same process goes for stated value stock
D cash for 360,000 CR common stock, $10 par value for 300,000 Paid-in Capital in Excess of par Value, Common for 60,000
a corp issued 40 shares of no-par common stock in exchange for land, estimated to be worth $800, the stock has no stated value
D land for 800 CR common stock, no-par value for 800
a corp issued 40 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $800. the stock has $1 per share stated value.
D organization expenses for $800 CR common stock $1 stated value for 40 CR paid in capital in excess of stated value, common stock for 760
sold 100 shares of treasury stock for $11.50 per share
DR cash 1,150 CR treasury stock, common 1,150
sold an additional 400 shares of treasury stock for $12 per share cost is $11.50 per share of 400 or 4,600
DR cash 4,800 CR treasury stock, common 4,600 CR paid-in capital, treasury stock 200
sold 500 shares of treasury stock for $10 per share the cost was 500 shares at $11.50 therefore it's a loss (750)
DR cash 5,000 DR paid-in capital, treasury stock 200 DR retained earnings 550 CR treasury stock, common 5,750
sold 20 treasury shares at $26 cash per share; then sold remaining 10 shares of treasury stock at $7 cash per share
DR cash 70 (10 shares x $7) DR paid-in capital, treasury stock 120 DR retained earnings 10 CR treasury stock 200 (10 shares x $20 cost to purchase)
quest has 10,000 shares of $10 par value stock outstanding. on dec 31, they declared a 10% stock dividend, when the stock was selling for $15 per share. the stock will be distributed to stockholders on jan 20. prepare jan 20 entry, record issuance of common stock dividend
DR common stock dividend distributable 10,000 CR common stock, $10 par value 10,000
quest has 10,000 shares of $10 par value stock outstanding. on dec 31, they declared a 30% stock dividend. the stock will be distributed to stockholders on jan 20. dec 31, declared a 10,000 share (30%) stock dividend
DR retained earnings 30,000 CR common stock dividend distributable 30,000 10,000 x 30% = 3,000 shares x $10 par value = 30,000
Purchased 1,000 of the company's own shares of stock in the open market at $11.50 per share.
DR treasury stock, common for 11,500 CR cash 11,500 shown as reduction in total stockholders' equity on the balance sheet
True
True or false: Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.
taxation
Two of the biggest disadvantages of the corporate form of business are government regulation and corporate _____
