chapter 11 AC 210

100 shares; $1 par value, 5$ per share. effect of this transaction on financial statements

-stockholders equity on B/S increases - financing activities section of the statement of cash flows increase

higher ROE means

-the company used financial leverage to its stockholders advantage -stockholders may enjoy higher returns

reissued 1000 shares of T.S for 10,000 prior T.S was 12,000, which included the 8,000 cost of the 1000 shares.

-treasury stock on the balance sheet will equal 4,000 -stockholders equity on the balance sheet will be 10,000 higher

preferred stock carries priority over common stock

both dividends and at liquidation

when diva declared a 10,000 cash dividend, it recorded a debit to _____ and a credit to dividends _______.

dividends; payable

P/E ratio is calculated by ?

dividing stock price by EPS

accumulated defict ?

- R.E has a debit balance - indicates accumulated net loss - is shown in () on the balance sheet

R.E. column of S.E

- dividends: common - dividends: preferred - net income

issued 10,000 shares of $1 par value common stock at $10 per share. journal entry = ?

-100,000 debit to cash -90,000 credit to additional -10,000 credit to common stock

the closing entry required at year end includes a ?

-debit to R.E -credit to dividends

increase 2 percentage points to 12%. increase may have happened because?

-generated more profits than the interest incurred on its borrowed funds -replace its 12% debt with 10%

advantages of debt financing over equity include ?

-interest payments are tax deductible -stockholders control will not be diluted

dividends on preferred stock ?

-may be paid at a fixed rate -are more attractive than common stock dividends to investors who want a stable income -are paid before dividends on common stock

1000 shares of own stock for $8. reissued shares for 10,000. treasury stock ?

10,000 increase in stockholders equity 2,000 (10,000 - 8000)

issued 100,00 shares of its 5%, 100 par value, cumulative preferred stock for 100 cash per share. journal entry to record this event includes a ?

100,000 debit to cash 100,000 credit for P.S.

1,000 shares of its 5%, 100 par value, cumulative preferred stock for $110 cash per share. journal entry?

110,000 debit to cash 10,000 credit to add paid 100,000 credit to preferred stock (1,000 x 100)

bought 1000 shares of its own stock for 8000. reissued the shares for 10,000. journal entry record the sale of treasury stock includes ?

8000 credit to treasury 2000 credit to add paid in capital

total assets= 100,000 liabilities= 60,000 S.E.= 40,000 before repurchasing 1000 shares of its $1 par value common stock for $5 each. after the repurchase the total assets =?, liabilites =?, S.E. = ?

95,000; 60,000; 35,000 100,000- (1,000x 5)

stock splits

cause the par value per share to change

stock splits and stock dividends

cause total stockholders equity to remain the same

EPS is a good predictor of ?

future stock prices

preferred stockholders

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

shares outstanding equals?

issued - treasury

under IFRS, if the company issuing preferred stock is contractually obligated to pay dividends or to redeem the shares at a future date, then the preferred stock is classified as

liability

ROE relates

net income to the average common stockholders equity

EPS = _______ divided by the average shares of common stock outstanding

net income- preferred dividends

after a 3-for-1 stock split, the par value of each stock is ______ the par value prior to the split.

one third

stock dividends

require a journal entry

the number of shares issued represent the number of shares ?

sold

treasury stock is reported in the ?

stockholders equity section of the balance sheet

contributed capital of 1,000,000 is found in the ______ section of the ______?

stockholders equity; balance sheet