Chapter 11 SmartBook

Barry Rich invested $5,000 of his personal income into his sole proprietorship, Rich's Farm. The effect of this transaction on Rich's Farm includes an:

Increase in Assets and increase in Owners Equity

_____ shares equals the number of shares _____ minus the number of shares repurchased by the company

Outstanding; Issued

A significant value per share of capital stock specified in the corporate charter is a:

Par Value

Stockit, Inc. issued 100,000 shares of the 1,000,000 shares authorized. Stockit has repurchased 10,000 of its shares. The number of shares authorized represents:

The maximum number of shares Stockit is allowed to issue

Treasury stock represents:

A contra-equity account and the amount paid for stock reacquired and currently held in treasury

The money a corporation receives from investors by issuing stock is called:

Contributed Capital

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 Credit Additional Paid-in Capital $600,000 Debit Cash $1,000,000

Shares that were previously issued to and owned by stockholders but have been reacquired and now held by the corporation are called:

Treasury Stock

When a company buys back it's own stock, the stock is reported on the balance sheet as:

Treasury Stock

Stock options:

Are often given to employees as part of their compensation and provide the holder with the option to purchase stock at a specified price during a specified period of time

The maximum number of shares a corporation is allowed to sell in accordance with its corporate charter are called:

Authorized Shares

Transactions between a company and its stockholders affect the company's:

Balance sheet

The entry to record the issuance of 100,000 shares of $0.10 per value common stock for $10 per share is debit:

Cash for $1,000,000 and credit Common Stock for $10,000 and Additional Paid-in Capital for $990,000

When a corporate does not specify a legal value per share, then the stock issued is referred to as:

No-par value stock

A major advantage of the corporate form of ownership is:

Shareholder legal liability

The number of shares issued represents the number of shares _____.

Sold

Advantages of debt financing over equity financing include that:

Stockholders control will not be diluted and interest payments are tax deductible

Retained Earnings are:

All of the company's earnings kept rather than distributed to stockholders, increased by net income, decreased by dividends, and sometimes called earned capital

The effect on the accounting equation of declaring a cash dividend includes:

An increase in liabilities and a decrease in Stockholders Equity