acc chapter 11

In an IPO on may 1, 2009, Timmy Hilfigure purchased 1,000 shares of Abner Crummie, Inc. for $5,000. On April 30, 2018, Timmy Hilfigure sold the 1,000 shares for $8,000 to Ralph Loring. What is the effect of the sale on April 30, 2018?A) Aber Crummie, Inc. will record a decrease in cash of $8,000

Abner Crummie, Inc. will not be directly affected by this transaction

the entry to record the issuance 100 shares of 3%, $100 par value preferred stock at a price of $105 is recorded with a debit to __________

Cash of $10,500 and credit to Preferred Stock of $10,000 and Additional Paid-in Capital-Preferred of $500

Which of the following line items would be found on a statement of stockholders equity that would not be on the statement of retained earnings?

Common stock Additional Paid-In Capital treasury stock

dilution solution, inc. repurchased 500 shares of its $2 par value common stock for $10,000. the journal entry to record to this transaction includes a ____________

Debit to treasury stock $10,000 credit to cash $10,000

the declaration and payment cash dividend ultimately cause a(n) ____________

a decrease in Retained Earnings a decrease in Cash decrease in stockholders' equity

the laws governing corporations ______

allow a company to be incorporated in a different state from the one in which it operates

Cumulative preferred stock is entitled to received current dividends plus "dividends in _____" before any future common dividends can be paid

arrears

the effect of repurchasing stock using the cost method is to ___________

decrease assets decrease stockholders equity increase treasury stock

Mega Corporation repurchased 1,000 shares of its $1 par value common stock for for $8,000. the effect of this transaction in the accounting equation includes a(n) ______

decrease in Assetsdecrease in STE

a cash dividend differs from a 2-for-1 stock split in that a cash dividend _______.

decreases retained earnings-decreases current assets

a stock dividend ____________.

distributes additional shares of shock to existing ............. cause retained earnings to ...........

Similar to a stock split, a stock _____ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders.

dividend

a stock dividend cause a stockholder's percentage ownership in a company to _________.

remain the same

corporations can raise large amounts of money because _______.

shares of stock can be purchased in small amounts, so even small investors can participate

match stock splits and stock dividends with their characteristics

stock splits-cause the par value per share to change stock splits and stock dividends-cause total stockholders' equity to remain the same Stock dividends - require a journal entry

why might a corporation want to repurchase its stock from existing stockholders?

to obtain shares to relssue to employees aspart of employee stock purchase plans

atomic, inc had 10,000 shares of $1 par value common stock outstanding prior to a 2-for-1 stock split. as a result of the stock split __________

20,000 shares are outstanding with a $0.50 par value

during the year, lox stock and bagel inc's net income was $60,000. its average stockholders' equity was $240,000 shares outstanding the entire year. its stock was selling for $10 per share, its P/E ratio equals _______. the company has no preferred stock

20.00

stock split

cause the par value per share to change

stock split and stock dividends

cause total stockholders' equity to remain the same

which of these is a separate legal entity?

corporation

the entry to record the redemption of preferred stock includes a ___________

debit to Preferred Stock

when diva,inc, declared a $10,000 cash dividend, it recorded a debit to _____________ and a credit to dividends ___________ .

dividends payable

payment date

dividends payable is decreased

if a corporation goes bankrupt, its stockholders _______

have residual claim to the assets after the creditors' claims have been satisfied

preferred stockholders _________

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

which type of investment would retirees wanting a stable income prefer?

income investment

what is the effect on the accounting equation of the entry to record the payment of dividends that were previously declared?

liabilities decrease assets decrease

stockit inc, has 1,000 shares of 5%, $100 par value, cumulative preferred stock outstanding. in its first two year of business, stockit did not declare a dividend. stockit's balance sheets at the end of its first two years of business should include ___________

no dividends payable

comparing EPS across companies is not advise because ______________

number of outstanding shares may vary accounting methods used may vary

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

one third

if you own stock in a corporation that goes bankrupt, you ______________.

only stand to lose what you paid to buy the stock

a stock _________, typically given to employees as part of their compensation that gives them the opportunity to buy the company's stock at a predetermined price, is recorded as an expense at the time it is granted.

option

a common stock's _________ value is typically set at a low amount and has little meaning today other than being used to by some states to assess fees

par

treasury stock on the balance sheet is ___________

subtracted from total stockholders' equity

contributed capital of $1,000,000 represents __________.

the amount stockholders have invested in exchange for stock

sources of financing for corporations include _______.

borrowing issuing stock

an advantage of ________ financing is interest is tax deductible.

debt

stock dividend

require a journal entry

declaration date

the board of directors officially approves a dividend

anuu, inc, sold 100,000 shares of the 1,000,000 shares it is allowed to sell. anuu repurchased 10,000 of these shares. the number of shares issued equals ________ shares.

100,000

__________ stock carries priority over common stock with regard to dividends

Preferred

sea the world cruises issued 400,000, $1 par value shares of the 1,000,000 shares authorized for $1,000,000. the entry to record the issuance of the stock includes __________

credit Common Stock $400,000 debit Cash $1,000,000 credit Additional Paid-in Capital $600,000

any difference between the cost of the treasury stock and the price when it is re-issued is recorded as a ___________

debit to additional paid-in capital when the price is below the cost

stockit, issued 100,000 shares of the 1,000,000 shares authorized. stockit has repurchased 10,000

maximum number of shares stockit is allowed to issue

the entry to record the issuance of preferred stock is __________

similar to the issuance of common stock increases stockholders' equity

before the board of directors declares a cash dividend, it should consider whether ___________.

-there is sufficient cash -there are sufficient retained earnings

which of the following reports net income relative to average common stockholders' equity?

ROE

__________ ___________ reports the cumulative amount of net income earned by the company less the cumulative amount of dividend since the corporation began

Retained earnings

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

a liability

advantages of a corporation are ________

it can raise large amounts of money by issuing stock ownership interest are easily transferable

when a corporate charter does not specify a legal value per share, then the stock issued is referred to as_________

no-par value stock

if a business cannot pay its debts, creditors can expect the owner to pay the debts with their personal assets if the business is a __________

sole proprietorship general partnership

an IPO _________

stands for initial public offering ;is when a private company goes public

date of record

stock records are finalized to determine which stockholders are to receive payment

why might a company issue a stock dividend?

to demonstrate commitment to stockholders while conserving while conserving cash during difficult times to lower the market price per share to signal an expectation of signification future earnings

shares that were previously issued to and owned by stockholders but have been reacquired and now held by the corporation are called ___________ stock.

treasury

Which of the following statements is true?

two sources of financing for a corporation are debt and equity an advantage of equity over debt financing is corporations are not required to pay dividends or repay stockholders.

Wok N Roll, Inc. began on January 1, 2014 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of $100 par value, 5%, cumulative preferred stock. No dividends were declared in 2014 or 2015. In 2016, Wok N Roll declared and paid a $0.50 dividend to its common stockholders. Assuming all shares originally issued are outstanding, the total dividend declared and paid in 2016 equals:

$65,000

a stock dividend ________.

-has no effect on stockholders' equity -decreases Retained Earnings -Increases Common Stock *provides no economic value fro current stockholders

accumulated deficit __________

1. is shown in () on the balance sheet 2. indicates accumulated net losses 3. means that RE has a debit balance

refurbish, inc. reissued 1,000 shares of its treasury stock for $10,000. prior to the reissuance, the treasury stock balance was $12,000, which included the $8,000 cost of the 1,000 shares reissued. as a result of this transaction, refurbish's ____________

Treasury stock will equal $4,000 stockholders' equity on the balance sheet will be $10,000 higher

dilution solutions, inc. repurchased 500 shares of its $2 par value common stock for $10,000. the journal entry to record this transaction includes a ________

$10,000 credit to cash $10,000 debit in treasury stock

refurbish, Inc. bought 1,000 shares of its own stock at $8 a share, Later it reissued the shares for $10,000. the effect of the entry to record the sale of treasury stock on the accounting equation includes a(n) _______

$10,000 increase in stockholders' equity