MGMT 200 Chapter 10
A distribution of assets to shareholders is referred to as a(n) ____
dividend
Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares.
45,000
Stock splits
Cause the par value per share to change
Stock splits and stock dividends
Cause total stockholders' equity to remain the same
Cumulative
Dividends not declared during one year are payable when declared in subsequent periods
Cumulative
During the current year, Petra Inc. pays dividends that were not declared last year
Convertible
Marcus turn in his preferred stock and receives common shares in exchange.
Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders' equity section of the balance sheet?
Preferred stock
Which of the following reports net income relative to average stockholders' equity in dollars?
ROE
stock dividends
Require a journal entry
Earned capital
Retained earnings
Which of the following ratios measures the ability of company management to generate earnings from the resources owners provide?
Return on equity
The rights of common stockholders typically include which of the following?
Right to vote for corporate directors. Right to dividends when declared. Right to distribution of assets in liquidation.
Which of the following are included in the rights of common stockholders?
Right to vote on certain matters.
Convertible
Shares can be converted for common stock
Morgan Company issued cumulative preferred stock. What additional special feature(s) could also have been granted to preferred stock holders?
The right to convert the shares to common shares The right to redeem the preferred shares for cash
True or false: The board of directors is responsible for establishing corporate policies.
True
Which of the following occurs on the date of record?
A list of shareholders that are entitled to receive a dividend is made.
Which of the following is typically presented first in the equity section of the balance sheet?
Preferred stock
Which financial statement summarizes the changes in the balance of each stockholders' equity account?
Statement of stockholders' equity only
Preferred stock tends to have attributes of
both bonds and common stock.
Stock dividends have the following effects on stockholders' equity
decrease in retained earnings no change to total stockholders' equity increase in common stock
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 liabilities.
A corporate charter:
describes the business activities. specifies the shares of stock to be issued. names the board of directors.
A distribution of a company's accumulated prior earnings is a(n) ______.
dividend
Preferred stockholders:
have the right to receive dividends only in the years the board of directors declares dividends.
The purpose of the statement of shareholders' equity is to
report the changes and the sources of the changes in shareholder equity accounts.
A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as _____ earnings.
retained
The amount of dividends paid out relative to the share price is referred to as:
dividend yield
Redeemable
Stocks can be turned in or re-purchased on demand
The journal entry to record the declaration of a dividend includes ______.
a debit to Dividends a credit to Dividends payable
The number of shares authorized is set forth in the company's:
articles of incorporation
Preferred stock carries priority over common stock:
both for dividends and at dissolution
A frequent reason for a stock split is to
cause the market price per share to decline.
Invested capital
common stock
Additional taxes and more paperwork are the two primary disadvantages of this business form:
corporation
Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights:
first right to specified amount of dividends preference in distribution of assets during dissolution of corporation
The amount of money paid into a company by its owners is referred to as:
invested capital
Evaluation of the company's profitability requires consideration of the amount of a company's earnings in relation to the size of the
investment
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.
A small stock dividend is valued at
market value.
Stock splits have the following effects on stockholders' equity
no change to total stockholders' equity
Large stock dividends are recorded at _______ and small stock dividends are recorded at ______.
par value; market value
The date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the
record date
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 corporation is owned by its _____
shareholders
Which of the following will decrease the par value of shares?
stock split
Shareholders' equity is another common term for ____ equity. (Do not use shareholders)
stockholders
The statement of shareholders' equity reports
the changes in each shareholder equity account.
Limited liability and ease of raising outside capital are advantages of this business form:
Corporation
Disadvantages of the corporate form of business are
additional taxation. more paperwork
Special contractually granted features can make preferred stock:
cumulative convertible redeemable
The declaration of cash dividends reduces _____ _____
stockholders equity
Return on _____ measures the ability of company management to generate earnings from the resources provided by owners.
equity
ROE relates ______.
net income to the average stockholders' equity
The dividend yield is calculated by dividing:
dividends per share by the stock price per share
Additional shares issued to existing owners without an exchange of cash may be in the form of stock _____ or stock _____.
dividends, splits
Investors who acquire preferred stock:
do not have voting rights. have preference as to dividends.
Positive _____ represent the key to a company's long-run survival.
earnings
Historically, par value was considered to be
the value of the company's shares of stock.
The advantages to the corporate form of business include
transferability of ownership. ease of raising capital.
Shares of stock that are repurchased are referred to as _____ stock.
treasury
Diva, Inc. declared and paid $10,000 of dividends in 2018. The dividends result in a reduction of
retained earnings
Shares of stock previously sold by the corporation that are repurchased are called
treasury stock.
The total number of shares that a company may sell is referred to as ___ shares.
authorized
Which of the following are included in the duties of the board of directors?
Appoint officers to manage the corporation. Establish corporate policies.
____ capital is the amount of money paid into a company by its owners.
Invested, Contributed, or Paid-in
Redeemable
Nurbert Inc. demands return of preferred stock at the pre-specified amount
When a business incorporates, it must file its ______ with the state in which it incorporates.
articles of incorporation
Preferred stock has a mixture of attributes of both equity and _____
debt
A corporation's accumulated, undistributed net income or loss is referred as
retained earnings
Earned capital increases ____.
retained earnings
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. $90,000 credit to Additional paid-in capital. $10,000 credit to Preferred stock.
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:
$110,000 debit to Cash. $10,000 credit to Additional paid-in capital - preferred. $100,000 credit to Preferred stock.
The legal capital per share of stock that is assigned when the corporation is first established is referred to as ____ ____
par value
True or false: A corporation is owned by debt and equity holders.
false