Chapter 11 Learnsmarts
when a company declared a $10,000 cash dividend, it recorded a debit to _______ and a credit to dividends __________
dividends, payable
preferred stock______________
has a preference as to dividends and is useful for raising capital without reducing common stockholders control
preferred stock is recorded as a
liability
when does a corporation record an increase in dividends payable?
on the declaration date
the journal entry to record the payment of a previously declared dividend includes
1. debit to dividends payable 2. credit to cash
items such as gains and losses from pensions, foreign currencies or financial investments are reported as
accumulated other comprehensive income
treasury stock is reported in the
equity section of the balance sheet
EPS is a good predictor of
future stock prices
no gain or loss is reported on the income statement form
treasury stock transactions
2 advantages of debt financing
1. control is not diluted 2. interest payments on debt are tax deductible
the number of shares outstanding equals the number of shares
issued minus the number of shares in treasury
number of shared authorized represents
max amount of shares allowed to issue
the dividend payment date is when
1. dividends payable is decreased 2. cash is decreased
a companies past profits that are kept instead of being paid to the stockholders are
retained earnings
dividends is closed into _____ ______ at the end of the fiscal year
retained earnings
the creation and oversight of all corporations are regulated by
state laws
contributed capital represents
the amount stockholders have invested in exchange for stock
what items would be under retained earnings in a statement of stockholders equity?
1. dividends: preferred 2. dividends: common 3. net income
a higher ROE means
1. the company used financial leverage to its stockholder's advantage 2. stockholders may enjoy financial returns
the owners of a _________ are not personally responsible for the debts of their business
corporation
the closing entry required at year end, includes a
debt to retained earnings, credit to dividends
dividends payable is recorded as a credit on the
declaration date
does a corporation have a legal obligation to pay dividends?
no