MGMT 200 Chapter 10

A distribution of assets to shareholders is referred to as a(n) ____

dividend

Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares.

45,000

Stock splits

Cause the par value per share to change

Stock splits and stock dividends

Cause total stockholders' equity to remain the same

Cumulative

Dividends not declared during one year are payable when declared in subsequent periods

Cumulative

During the current year, Petra Inc. pays dividends that were not declared last year

Convertible

Marcus turn in his preferred stock and receives common shares in exchange.

Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders' equity section of the balance sheet?

Preferred stock

Which of the following reports net income relative to average stockholders' equity in dollars?

ROE

stock dividends

Require a journal entry

Earned capital

Retained earnings

Which of the following ratios measures the ability of company management to generate earnings from the resources owners provide?

Return on equity

The rights of common stockholders typically include which of the following?

Right to vote for corporate directors. Right to dividends when declared. Right to distribution of assets in liquidation.

Which of the following are included in the rights of common stockholders?

Right to vote on certain matters.

Convertible

Shares can be converted for common stock

Morgan Company issued cumulative preferred stock. What additional special feature(s) could also have been granted to preferred stock holders?

The right to convert the shares to common shares The right to redeem the preferred shares for cash

True or false: The board of directors is responsible for establishing corporate policies.

True

Which of the following occurs on the date of record?

A list of shareholders that are entitled to receive a dividend is made.

Which of the following is typically presented first in the equity section of the balance sheet?

Preferred stock

Which financial statement summarizes the changes in the balance of each stockholders' equity account?

Statement of stockholders' equity only

Preferred stock tends to have attributes of

both bonds and common stock.

Stock dividends have the following effects on stockholders' equity

decrease in retained earnings no change to total stockholders' equity increase in common stock

The effect on the accounting equation of declaring a dividend that will be paid at a later date includes a(n):

decrease in stockholders' equity. increase in liabilities.

A corporate charter:

describes the business activities. specifies the shares of stock to be issued. names the board of directors.

A distribution of a company's accumulated prior earnings is a(n) ______.

dividend

Preferred stockholders:

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

The purpose of the statement of shareholders' equity is to

report the changes and the sources of the changes in shareholder equity accounts.

A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as _____ earnings.

retained

The amount of dividends paid out relative to the share price is referred to as:

dividend yield

Redeemable

Stocks can be turned in or re-purchased on demand

The journal entry to record the declaration of a dividend includes ______.

a debit to Dividends a credit to Dividends payable

The number of shares authorized is set forth in the company's:

articles of incorporation

Preferred stock carries priority over common stock:

both for dividends and at dissolution

A frequent reason for a stock split is to

cause the market price per share to decline.

Invested capital

common stock

Additional taxes and more paperwork are the two primary disadvantages of this business form:

corporation

Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights:

first right to specified amount of dividends preference in distribution of assets during dissolution of corporation

The amount of money paid into a company by its owners is referred to as:

invested capital

Evaluation of the company's profitability requires consideration of the amount of a company's earnings in relation to the size of the

investment

The number of shares outstanding equals the number of shares ______.

issued minus the number of shares in treasury

The most important advantage to the corporate form of business is

limited liability

In a corporation, the stockholders' potential loss is

limited to the amount of the investment.

A small stock dividend is valued at

market value.

Stock splits have the following effects on stockholders' equity

no change to total stockholders' equity

Large stock dividends are recorded at _______ and small stock dividends are recorded at ______.

par value; market value

The date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the

record date

Corporations will declare a stock split in order to ______.

reduce the market price of a share of stock and make it more attractive to some investors

A corporation is owned by its _____

shareholders

Which of the following will decrease the par value of shares?

stock split

Shareholders' equity is another common term for ____ equity. (Do not use shareholders)

stockholders

The statement of shareholders' equity reports

the changes in each shareholder equity account.

Limited liability and ease of raising outside capital are advantages of this business form:

Corporation

Disadvantages of the corporate form of business are

additional taxation. more paperwork

Special contractually granted features can make preferred stock:

cumulative convertible redeemable

The declaration of cash dividends reduces _____ _____

stockholders equity

Return on _____ measures the ability of company management to generate earnings from the resources provided by owners.

equity

ROE relates ______.

net income to the average stockholders' equity

The dividend yield is calculated by dividing:

dividends per share by the stock price per share

Additional shares issued to existing owners without an exchange of cash may be in the form of stock _____ or stock _____.

dividends, splits

Investors who acquire preferred stock:

do not have voting rights. have preference as to dividends.

Positive _____ represent the key to a company's long-run survival.

earnings

Historically, par value was considered to be

the value of the company's shares of stock.

The advantages to the corporate form of business include

transferability of ownership. ease of raising capital.

Shares of stock that are repurchased are referred to as _____ stock.

treasury

Diva, Inc. declared and paid $10,000 of dividends in 2018. The dividends result in a reduction of

retained earnings

Shares of stock previously sold by the corporation that are repurchased are called

treasury stock.

The total number of shares that a company may sell is referred to as ___ shares.

authorized

Which of the following are included in the duties of the board of directors?

Appoint officers to manage the corporation. Establish corporate policies.

____ capital is the amount of money paid into a company by its owners.

Invested, Contributed, or Paid-in

Redeemable

Nurbert Inc. demands return of preferred stock at the pre-specified amount

When a business incorporates, it must file its ______ with the state in which it incorporates.

articles of incorporation

Preferred stock has a mixture of attributes of both equity and _____

debt

A corporation's accumulated, undistributed net income or loss is referred as

retained earnings

Earned capital increases ____.

retained earnings

X-Co issued 1,000 shares of its 5%, $10 par value, cumulative preferred stock for $100 cash per share. The journal entry to record this event includes:

$100,000 debit to Cash. $90,000 credit to Additional paid-in capital. $10,000 credit to Preferred stock.

Wyanot Company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $110 cash per share. The journal entry to record this transaction includes:

$110,000 debit to Cash. $10,000 credit to Additional paid-in capital - preferred. $100,000 credit to Preferred stock.

The legal capital per share of stock that is assigned when the corporation is first established is referred to as ____ ____

par value

True or false: A corporation is owned by debt and equity holders.

false