CH:10 SHE

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

articles of incorporation

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

articles of incorporation

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

authorized

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

false

A stock dividend ______.

has no effect on each stockholder's ownership percentage

Select all that apply Preferred stock is advantageous in that it: Multiple select question. receives dividends before creditors are to receive any interest payments. has priority over creditors at liquidation. has priority over common stock when dividends are declared. has priority over common stock at liquidation.

has priority over common stock when dividends are declared. has priority over common stock at liquidation.

Preferred stockholders:

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

Retained earnings are:

increased by net income. decreased by dividends. sometimes called earned capital. all of the company's earnings not distributed to stockholders.

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

invested

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

invested capital

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.

ROE relates______.

net income to the average stockholders' equity

Retained earnings of $100,000 represent a corporation's cumulative earnings ______ and is shown on the _____.

not paid out by dividends; balance sheet and statement of retained earnings

Shareholders' equity is another common term for ____________ equity.

owners

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 stock dividend causes a stockholder's percentage ownership in a company to _____________

remain the same

Earned capital increases ______.

retained earnings

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

right to vote

Another common term for stockholders' equity is:

shareholders' equity

The number of shares issued represents the number of shares:

sold

Select all that apply Retained earnings are: sometimes called earned capital. all of the company's earnings not distributed to stockholders. increased by net income. decreased by dividends. decreased by purchases of land. equal to cash.

sometimes called earned capital. all of the company's earnings not distributed to stockholders. increased by net income. decreased by dividends.

A corporation is owned by its

stockholders

A 2-for-1 stock split increases the marketability of the stock because

the market price per share decreases.

Select all that apply The advantages to the corporate form of business include Multiple select question. transferability of ownership. double taxation for the corporation. ease of raising capital.

transferability of ownership. ease of raising capital.

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

treasury stock.

Select all that apply 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: Multiple select question. $100,000 credit to Preferred stock. $100,000 debit to Cash. $10,000 credit to Preferred stock. $90,000 credit to Additional paid-in capital. $90,000 debit to Cash.

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

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

Select all that apply Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights: consistently higher return than earned by common stockholders guaranteed dividends preference in distribution of assets during dissolution of corporation first right to specified amount of dividends

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

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

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

Corporation

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

Preferred stock

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

ROE

Select all that apply The rights of common stockholders typically include which of the following? Multiple select question. Right to dividends when declared. Right to vote for corporate directors. Right to distribution of assets in liquidation. Right to receive a percentage of net income each year.

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

Which financial statement summarizes the changes in the balance of each equity over time?

Statement of stockholders' equity only

Distributions of stock to current shareholders of a corporation are called what type of distribution? (Select all that apply.)

Stock split Stock dividend

Select all that apply Morgan Company issued cumulative preferred stock. What additional special feature(s) could also have been granted to preferred stock holders? A variable interest rate that increased each year The right to convert the shares to common shares The right to redeem the preferred shares for cash

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

Shares of stock that are repurchased are referred to as______________ stock.

Treasury

The statement of stockholders' equity reports

changes in earnings and dividends for a specified period of time

Select all that apply Special contractually granted features can make preferred stock: cumulative redeemable convertible extraordinary

cumulative redeemable convertible

Select all that apply 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 assets. increase in stockholders' equity. decrease in assets. increase in liabilities. decrease in liabilities.

decrease in stockholders' equity. increase in liabilities.

When a corporation distributes assets of the company to its investors, it is referred to as a(n)

dividen

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

dividend

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

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

dividends, splits

Preferred stock generally (has/does not have) ______ voting rights and (has/does not have) ______ preference as to dividends.

does not have; has

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

earnings

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:

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

Select all that apply A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document? Articles of incorporation Corporate tax return Corporate charter Corporate proxy

Articles of incorporation Corporate charter