ACC 201 - Final Review (Ch.11 Key Terms)

____ 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

____ is a general term that refers to any shares issued to obtain capital (owner financing).

Capital Stock

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

Cumulative

____ preferred stock confers no right to prior period unpaid dividends.

Noncumulative

____ stock typically includes preference for receiving dividends and for the distribution of corporate assets during a liquidation.

Preferred

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

Preferred stock

Common Stock

corporation's basic ownership share; also generically called Capital Stock

Treasury Stock

corporation's own stock that it reacquired and still holds

Prior Period Adjustment

correction of an error in a prior year that is reported in the statement of retained earning (or statement of stockholders' equity" net of any income tax effects

Organization Expenses (costs)

costs such as legal fees and promoter fees to bring an entity into existence

Retained Earnings

cumulative income less cumulative losses and dividends

Date of Payment

date the corporation makes the dividend payment

Date of Record

date the directors specify for identifying stockholders to receive dividends

Date of Declaration

date the directors vote to pay a dividend

Retained Earnings Deficit

debit (abnormal) balance in Retained Earnings, occurs when cumulative losses and dividends exceed cumulative income; also called Accumulated Deficit

Discount on Stock

difference between the par value and its issue price when issued at a price below par value

Liquidating Cash Dividend

distribution of assets that returns part of the original investment to stockholder; deducted from contributed capital accounts

Proxy

legal document giving a stockholder's agent the power to exercise the stockholder's voting rights

Identify the advantages of the corporate form of busienss

limited liability, continuous life, ease of capital accumulation

A ____ is a document that gives a designated agent the right to vote the stock.

proxy

Price-Earnings (PE) Ratio

ratio of a company's current market value per share to its earnings per share; also called Price-to-Earnings

Dividend Yield

ratio of the annual amount of cash dividends distributed to common shareholders relative to the common stock's market value (price)

Restricted Retained Earnings

retained earnings not available for dividends because of legal or contractual limiteations

Appropriated Retained Earnings

retained earnings separately reported to inform stockholders of funding needs

The board of directors of Visor, Inc. authorize a ____, a distribution of additional shares of the corporations own stock, to existing shareholders.

stock dividend

Small Stock Dividend

stock dividend that is 25% or less of a corporation's previously outstanding shares

Large Stock Dividend

stock dividend that is more than 25% of the previously outstanding shares

Preferred Stock

stock with a priority status over common stockholders one or more ways, such as paying dividends or distributing assets

Preemptive Right

stockholders' right to maintain their proportionate interest in a corporation with any additional share issued

Authorized Stock

total amount of stock that a corporation's charter authorizes it to issues

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

treasury

Dividend in Arrears

unpaid dividend on cumulative preferred stock; must be paid before any regular dividends on preferred stock and before any dividends on common stock

Par Value

value assigned a share of stock by the corporate charter when the stock is authorized

Stockholders have the right to ____ at stockholders' meetings.

vote

Stock Dividend

Corporation's distribution of its own stock to its stockholders without the receipt of any payment

____ 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

Stockholders' Equity

a corporation's equity; also called Shareholders' Equity or Corporate Capital

Minimum Legal Capital

amount of assets defined by law that stockholders must (potentially) invest in a corporation; usually defined as par value of the stock; intended to protect creditors

Earnings Per Share (EPS)

amount of income earned by each share of a company's outstanding common stock; also called Net Income Per Share

Change in an Accounting Estimate

change in an accounting estimate that results from new information, subsequent developments, or improved judgment that impacts current and future periods

Organization expenses, or the costs to organize a corporation, include which of the following?

charter fees, legal fees

Par Value Stock

class of stock assigned a par value by the corporate charter

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

common

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

dividend

Financial Leverage

earning a higher return on equity by paying dividends on preferred stock or interest on debt at a rate lower than the return earned with the assets from issuing preferred stock or debt; also called Trading on the Equity

A ____ dividend returns a portion of the capital contributed by stockholders. This requires a debit to one of the contributed capital accounts, instead of retained earnings, at the declaration.

liquidating

Stockholders' equity, reported on the balance sheet, consists of which of the following accounts?

paid-in capital, retained earnings

Noncumulative Preferred Stock

preferred stock on which t right to receive dividends is lost for any period when dividends are not declared

Cumulative Preferred Stock

preferred stock on which undeclared dividends accumulate until paid; common stockholders cannot receive dividends until cumulative dividends are paid

Participating Preferred Stock

preferred stock that shares with common stockholders any dividends paid in excess of the percent stated on preferred stock

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.

split

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

stock

No-Par Value Stock

stock class that has not been assigned a par (or stated) value by the corporate charter

Paid-In Capital in Excess of Par Value

amount received from issuance of stock that is in excess of the stock's par value

Corporation

business that is a separate legal entity under state or federal laws; its owners are referred to as Shareholders or Stockholders

A ____ is an entity created by law that is separate from its owners. owners are called stockholders or shareholders. These entities can be privately or publicly held.

corporation

Diluted Earnings Per Share

earnings per share calculation that requires dilutive securities be added to the denominator or the basic EPS calculation

Statement of stockholder's equity

financial statement that lists the beginning and ending balances of each major equity account and describes all changes in those accounts

Capital Stock

general term referring to a corporation's stock used in obtaining capital (owner financing)

Identify the disadvantages of the corporate form of business

government regulation, corporate taxation

Basic Earnings Per Share

net income less any preferred dividends and then divided by weighted-average common shares outstanding

Stated Value Stock

no-par stock assigned a stated value per share; this amount is recorded in the stock account when the stock is issued

Market Value Per Share

price at which stock is bought or sold

Corrections of material errors in prior period financial statements, such as math errors, bas accounting, and missed facts are reported in the statement of stockholders' equity as:

prior period adjustments

The market value per share is the price at which stock is bought and sold. Which of the following factors does not influence market value?

par value

Nonparticipating Preferred Stock

preferred stock on which dividends are limited to a maximum amount each year

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

stock

A corporation can sell ____ directly or indirectly (through a brokerage).

stock

Investors who buy a corporation's stock sometimes receive a stock ____ as proof of share ownership.

certificate

Reverse Stock Split

occurs when a corporate calls in its stock and replaces each share with less than one new share; increases both market value per share and any par or stated value per share

Stock Split

occurs when a corporation calls in its stock and replaces each share with more than one new share; decreases both the market per share and any par or stated value per share