Smartbook ch 13

Identify the formula to compute basic earnings per share.

(Net income - preferred dividends)/weighted-average common shares outstanding

_______ 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.

Authorized

A _________ is the distribution of cash to its owners. This is determined by the board of directors.

Cash dividend

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?

Credit to Paid-In Capital, in Excess of Stated Value for $450. $10-$1=9 9*50=450 Credit to Common Stock for $50. Common stock is credited for the stated value of $1 per share. $1 x 50=$50. The remainder of $450 is credited to the Paid-in Capital account. Debit to Cash for $500. 50*10

_______ preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Cumulative

The formula for the price-earnings ratio is ______ value per share/earnings per share.

Market

Jordan Inc.'s charter states that there are 50,000 shares of stock authorized with a par value of $5 per share. This typically means that investors must pay a (minimum/maximum) _______ of $5 per share to invest in the

Minimum

When the board of directors authorizes a cash dividend to investors, there are three important dates involved—the date of declaration, date of record, and date of

Payment

Stock that typically includes preference for receiving dividends and for distribution of corporate assets during a liquidation is called ____ stock

Preferred

The board of directors of Visor, Inc. authorize a _________, a distribution of additional shares of the corporation's own stock, to existing shareholders.

Stock dividend

When a corporation purchases shares of its own stock, it is called ________ stock.

Treasury

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 $_______

Treasury 50*50 $2,500

When all authorized shares of stock have the same rights and characteristics, the stock is called _______ stock.

common

A statement of stockholders' equity lists balances of:

common stock shares net income retained earnings cash dividends

_________ ___________ is an account that consists of a company's cumulative net income less any losses and dividends declared since its inception

Retained Earnings

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. Multiple choice question.

split

In the computation of basic earnings per share, a company will use the _____.

weighted-average common shares outstanding

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 _________.

2,500 10,000*$5*.05=2,500

A small stock dividend is a distribution of _____% or less of previously outstanding shares.

25

(Cumulative/noncumulative) _____ preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Cumulative

_________ value stock is stock not assigned a value per share by the corporate charter. Its advantage is that it can be issued at any price without the possibility of a minimum legal capita

No-par

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 _______.

Paid-in Capital in Excess of Par $8000

John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts?

Paid-in Capital in Excess of Par Value Common Stock

_________ has/have special rights that give it priority over other types of stock in one or more areas.

Preferred Stock

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

True or false: Preferred stock can be issued to raise money without giving up control.

True

The account that consists of a company's cumulative net income less any losses and dividends declared since its inception is called _________.

Retained Earnings

On January 1, the board of directors of Shante, Inc. declared a 10% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to record this transaction would include a debit to _____ in the amount of ______.

Retained Earnings; $5,000 10% of 10,000= 1,000 *$5= $5,000

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.

Split

_____ value stock is no-par stock to which the directors assigned a certain value per share. This value becomes the minimum legal capital per share in this case.

Stated

The _____ lists the beginning and ending balances of key equity accounts and describes the changes that occur during the period.

Statement of stockholders' equity

A _______ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.

Stock

Which of the following is not a reason that a corporation would issue preferred stock?

To obtain a tax advantage over corporations with no preferred stock

A stock dividend that is greater than 25% of the previously outstanding shares of stock is considered to be a (small/large) _______ stock dividend.

Large

Crystal, Inc. has 500 shares of outstanding $10 par common stock, with a current market value of $20 per share. Earnings per share is $2.00. The price-earnings ratio is

10 20/2=10 price-earnings ratio= Market value (price) per share / Earnings per share

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 $_____

19,500 1,000*10*5%= 500 2,000-500=19,500

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 _______.

Credit $1000

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) _______ to Common Stock for ______.

Credit $500

Niren, Inc.'s charter authorizes 1,000,000 shares of stock at a par value of $1 per share. Niren sells 100 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include a (debit/credit) ________ , to Common Stock, $1 par for $ ________

Credit 100

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) _______ to the preferred stock account in the amount of $______

Credit 100 100*1=100

Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) ________ to Common Stock for $ ______

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, $ _____

Credit 500 50*10=500

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 $

Credit She SOLD $150 10*15

Zion, Inc. declares a 10% stock dividend when there are 10,000 shares of $1 par value stock issued and outstanding and the market value is $5 per share. On the date of payment, Zion will issue the stock and record the transaction with which of the following entries?

Credit to Common Stock for $1,000. Common Stock is credited at the par value. Debit to Common Stock Dividend Distributable for $1,000. The Common Stock Dividend Distributable account is recorded at par value and the excess is recorded in the Paid-in Capital in Excess of Par Value account on date of declaration.

On January 1, the board of directors of Zion, Inc. declare a 10% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. On March 15, the date of payment, Zion issued the stock. The entry necessary on March 15 would include a (credit/debit) ______ to Common Stock Dividends distributable for ______.

Debit $1000 The Common Stock Dividends distributable account is debited for the par value amount. The excess, to equal market value, is credited to Paid-in Capital in Excess of Par Value. 10% * 10,000= 1,000*1= 1,000

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?

Debit to Cash for $200. Credit to Common Stock, $1 par for $200.

The board of directors authorizes a cash ________ or distribution of cash to its investors.

Dividend

Cameron, Inc. held 1,000 shares of its own $10 par value common stock purchased for $20 per share. In March, Cameron sold 10 shares at $20 per share. The journal entry to record the sale of treasury stock would include a (debit/credit) ________ to Treasury Stock in the amount of ________.

credit; $200

Preferred stock usually carries a preference for dividends, meaning that:

dividends are allocated to preferred shareholders before they are issued to common shareholders

A ratio that divides market value (price) per share by earnings per share is called:

price-earnings ratio. price-earnings ratio= Market value (price) per share / Earnings per share

Carefree, Inc. has 20,000 shares issued and outstanding. On August 1, the board authorizes a 20% stock dividend. This is considered a (large/small) _____ stock dividend.

small 25% or less

An advantage of purchasing preferred stock is that preferred shareholders are guaranteed to receive dividend payments each year.

False

Visor, Inc. had net income during the period of $10,000. Preferred dividends were $2,000 and the weighted-average common shares outstanding were 500. Basic earnings per share equal $____

$16 10,000-2,000 / 500 = 16 Basic earnings per share= Net Income - Preferred dividends / Weighted-average common shares outstanding

On January 1, Lang, Inc. has 100,000 shares of stock issued and outstanding. The board of directors of Lang wants to authorize a large stock dividend. This means that they must authorize a stock dividend of at least ______ shares of stock.

25,001

Authorizing a cash dividend payment to investors requires three crucial dates. Identify which of the following is not a correct term to describe these dates.

Date of authorization

On June 1, the board of directors of Big, Inc. declare a 20% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to record this transaction would include a (debit/credit) ______ to Retained Earnings in the amount of $_____

Debit $10,000 10,000*1

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?

Debit to Treasury Stock; credit to Cash.

The price- _______ ratio reveals market expectations.

Earning

The amount of income earned per each share of a company's outstanding common stock is known as:

Earnings per share