Ch 11 Learnsmarts
In an IPO on May 1, 2009, Timmy Hilfigure purchased 1,000 shares of abner crummie, Inc for $5,000. On April 30,2015, Timmy sold 1,000 shares for $8000 to Ralph loring. What is the effect on the sale on April 30,2015?
Abner crummie, Inc will not be directly affected by this transaction
what is an IPO?
Initial Public Offering & when a private company goes goes public
Cumulative preferred stock is entitled to receive current dividends plus "dividends in ___?____" before any future common dividends can be paid
arrears
dividend payment date is when?
cash is decreased dividends payable is decreased
stock splits
cause the par value per share to change
stock splits and stock dividends
cause total stockholders equity to remain the same
The journal Entry to record the declaration of a dividend includes?
debit dividends credit dividends payable
The journal entry to record the payment of a previously declared dividend includes?
debit dividends payable credit cash
Mega Corporation repurchased 1,000 shares of its $1 par value CS for $8,000. the Effect of this transaction on the Accounting equation include?
decrease in Assets decrease in STE
similar to stock split, a stock_______ also distribution additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders
dividend
payment date
dividends payable is decreased
preferred stock generally ____preferences as to dividends
has
common stock par value_________
introduced to prevent bankrupt companies from unfairly distributing company resources has become less meaningful b/c states use other means to prevent removing capital from distresses companies affects how common stock is recorded
A corporation may be restricted from paying a dividend if?
loan agreement is violated & dividends > than the amount of retained earnings
a dividend date of record is the date a corporation
makes no entry - cut off date to determine which stockholders get dividends
do corporations have legal obligations to pay dividends?
no
Which statements are true about cash dividends?
on payment date, current assets are decreased on declaration date, liabilities are increased
Earnings per share appears?
on the income statement
stock dividends
require a journal entry
dividends is closed into ___________at the end of the fiscal year
retained earnings
what are the line items that would be found on a statement of STE
stock issuance dividends APIC treasury net income
Date of record
stock records are finalized to determine which Stockholders get dividends
a higher ROE mean?
the company used financial leverage to its Stockholders advantage stockholders may enjoy higher returns
what is reason a company would NOT repurchase stock
to increase STE balance and improve ROE
why stock options are given
to provide incentive for employees to work harder
T/F, No gain or losses are reported when treasury stock is reissued b/c GAAP does not consider transactions between a corporation and its owners to be a profit making activities?
true
when should a corporation record a liability for dividends on its cumulative preferred stock
when the dividends have been declared
Refurbish , Inc bought 1,000 shares of its own stock for $8 per share. Later reissued the shares for $10,000. The effect on the entry to record the sale of treasury stock on the accounting equation include?
$10,000 increase to STE
declaration date
Board of directors officially approve a dividend
Canton, Inc issued 10,000 shares of $1 par value common stock at $10 per share. recorded this transaction with a $100,000 debit to cash and $100,000 credit to common stock. As a result this entry?
Common stock is overstated APIC will be understated
Dilution Solutions Inc, repurchased 500 shares of its $2 par value CS for $10,000. The Journal Entry
Debit to treasury stock $10,000 credit to cash $10,000 * when repurchase record how much it was bought for NOT par
* review Refurbish, Inc reissued 1,000 shares of its Treasury for $10,000. Prior to reissuance, Treasury was $12,000, which included the $8,000 cost of the 1,000 shares reissued. After recording this transaction_______
Treasury Stock = $4,000 APIC increased by $2,000
dividends on preferred stock...
more attractive than common stock dividends to investors that want a stable income paid before dividends on CS paid at a fixed rate, such as 7%
a corporation that has a loan covenant
must disclose the covenant in the notes to the financial statements may be required to pay loan immediately if it violates its covenant
lenders will sometimes impose dividend restrictions to?
prevent corporations from paying out too much to Stockholders