Accounting - Chapter 11
To obtain a corporate charter, the organizers of the org. submit an application called the ____; specify the number of shares that a corporation is authorized to issue by the state of incorporation
articles of incorporation
A historical concept, representing the amounts invested by stockholders plus the amounts earned and retained by the corp
book value
The amount of net assets represented by each share of stock
book value per share
How is each stockholder's ownership interest determined?
by how many shares they own
Distributions of cash to stockholders (including the payment of cash dividends) represent ______ _____ which are also classified as financing activities
cash outlays
Book value is only computed for which type of stock?
common
The basic type of capital stock issued by every corporation; possess the traditional rights of ownership (voting rights, participation in dividends, and residual claim to assets in the event of liquidation)
common stock
Are top level managers appointed by the BOD
corporate officers (CEO, CFO)
A form of a business organization that is recognized under the law as a separate legal entity, with rights and responsibilities apart from those of its owners
corporation
If any/all part of the regular dividend on preferred stock is omitted in a given year, it must be paid in a subsequent year before any dividend can be paid on the common stock
cumulative preferred stock
Treasury stock account is _____ for the cost of the shares purchased, not their par value
debited
A cash payment to shareholders which represent a distribution of accumulated earnings; generally cannot exceed the amount of a corp's retained earings
dividends
In a statement of cash flows, transactions with the stockholders of a corp are classified as
financing activities
The issuance of capital stock for cash represents a receipt from
financing activities
The amount below which stockholders' equity cannot be reduced, except by losses from business operations (or by special legal action)
legal capital
The term for the concept that stockholders are not personally liable for the debts of a corporation
limited personal liability
What two reasons do businesses incorporate?
limited shareholder liability transferability of ownership
The price at which these shares change hands btwn investors represents the ____ ____ of the stock
market value
From an INVESTORS pov, shares owned in a publicly owned company are an asset, usually called
marketable securities
The balances in paid-in capital accounts remain unchanged unless what 2 things happen?
more shares are issued outstanding shares are permanently retired
When the entire issue price is credited to the Capital Stock account and is view as legal capital not subject to withdrawal
no-par
Shares that have been issued and are in the hands of stockholders
outstanding shares
Represents an amount invested in the company by its owners at the time the company sells the stock; this amount represents capital available to the company from the original sale of the stock
outstanding stock
The company issuing stock records the issue price in its
paid-in capital accounts
May be regarded as a minimum cushion of equity capital existing for the protection of creditors
par value
Represents the legal capital per share
par value (stated value)
When the rights of stockholders are modified this term is often used to describe the resulting type of capital stock
preferred stock
The state in which the corporation is called
state of incorporation
increasing the number of its common shares outstanding, reduces the market price of each share of stock, and does not reduce the amount of equity financing of the company
stock split
Generally occur when a company's stock price has become too expensive for many investors
stock splits
The owners of a corporation are called
stockholders
What happens when stock is sold for more than par value?
the Capital Stock account is credited with the par value of the shares issues and a separate account, Additional Paid-in Capital, is credited for the excess of selling price over par
A main feature of a corporation is ownership is represented by shares of capital stock that can be bought and sold
transferability of ownership
Shares of a corporation's own capital stock that have been issued and later reacquired by the issuing company but have not been cancelled or permanently retired
treasury stock
True or false: A corporation is obligated to pay dividends to stockholders only when cash is available and the BOD declares a dividend
true
This person guarantees the issuing corporation a specific price for the stock and earns a profit by selling the shares to the investing public at a slightly higher price
underwriter