Smartbook Chapter 11

Keys, Inc. purchased 100 shares of its own common stock for $10 per share. The stock is now classified as Blank______ stock, a contra equity account, reported on the statement of stockholder's equity.

treasury

When a corporation purchases shares of its own stock, it is called ______ stock.

treasury

Preferred stock can be issued to raise money without giving up control.

true

Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.

true

In the computation of basic earnings per share, a company will use the ______.

weighted-average common shares outstanding

Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $15,000 dividend, the payments to preferred shareholders will total ______.

$2,500 10,000 shares x $5 x .05 = $2,500.

______ stock is the number of shares that a corporation's charter allows it to sell.

Authorized

Blink, Inc. has 1,000 shares of $10 par, 5% preferred stock, and 20,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $20,000 dividend, the payment to common shareholders will total $

Blank 1: 19500 or 19,500

___________ stock is the number of shares that a corporation's charter allows it to sell. The number of these shares usually exceeds the number of shares issued (and outstanding), often by a large amount.

Blank 1: Authorized

________ ___________ is an account that consists of a company's cumulative net income less any losses and dividends declared since its inception.

Blank 1: Retained Blank 2: Earnings

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) ______ to the preferred stock account in the amount of $

Blank 1: credit Blank 2: 100

Niren, Inc.'s charter authorizes 1,000,000 shares of stock at a par value of $1 per share. Niren sells 100 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include a (debit/credit) ___________ to Common Stock, $1 par for $

Blank 1: credit Blank 2: 100 or $100

Avery, Inc. held 100 shares of its own $10 par value common stock purchased for $15 per share. On December 1, Avery sold 10 shares at $15 per share. The journal entry to record the sale of treasury stock would include a (debit/credit)_________ to Treasury Stock in the amount of $.

Blank 1: credit Blank 2: 150

Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) _______ to Common Stock, for $

Blank 1: credit Blank 2: 500

Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a (debit/credit) ___________ to Common Stock, $

Blank 1: credit Blank 2: 500

The board of directors authorizes a cash _______ or distribution of cash to its investors.

Blank 1: dividend

Stock that typically includes preference for receiving dividends and for distribution of corporate assets during a liquidation is called (common/preferred) ________ stock.

Blank 1: preferred or preferred stock

Corporations can be separated into two types. A (privately/publicly) ____________ held corporation does not offer its stock for public sale and usually has few stockholders. A (privately/publicly) _______________ held corporation offers its stock for public sale and can have thousands of stockholders.

Blank 1: privately, closely, or private Blank 2: publicly or public

A charter application usually must be signed by the prospective stockholders called incorporaters or _____________. Then, it is filed with the appropriate state official.

Blank 1: promoters

Mario, Inc. declares a 2-for-1 stock _____________. This means that Mario will "call in" its outstanding shares and issue two shares in exchange for each old share of stock.

Blank 1: split

Two of the biggest disadvantages of the corporate form of business are government regulation and corporate _______

Blank 1: taxation, taxes, tax, or double taxation

Stockholders have the right to _____________ at stockholders' meetings.

Blank 1: vote

John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts? (Check all that apply.)

Common Stock Paid-in Capital in Excess of Par Value

Identify the advantages of the corporate form of business. (Check all that apply.)

Continuous life Ease of capital accumulation Limited liability of stockholders

Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries?

Debit to Cash for $200. Credit to Common Stock, $1 par for $200.

Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share. Vanya sells 50 shares of stock at its initial offering for $10 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.)

Debit to Cash for $500. Credit to Paid-In Capital, in Excess of Stated Value for $450. Credit to Common Stock for $50.

Ivers, Inc. purchased 100 shares of its own $10 par value common stock for $20 per share. The journal entry to record this transaction would include which of the following entries?

Debit to Treasury Stock; credit to Cash.

Identify the disadvantages of the corporate form of business. (Check all that apply.)

Government regulation Corporate taxation

Identify which of the following is not generally a right of common stockholders.

Manage operations

Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200 shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to record this transaction in the books of Damian, Inc., will include a credit to ______ in the amount of ______.

Paid-in Capital, in Excess of Par; $8,000

______ has/have special rights that give it priority over other types of stock in one or more areas.

Preferred stock

The account that consists of a company's cumulative net income less any losses and dividends declared since its inception is called

Retained Earnings

Which of the following is not a reason that a corporation would issue preferred stock?

To obtain a tax advantage over corporations with no preferred stock

______ is the distribution of cash to its owners. This is determined by the board of directors.

cash dividend

A ______ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held.

corporation

On May 25, Tyler, Inc. issues 100 shares of $10 par value preferred stock for $5,000 cash. The entry to record this transaction would include a (debit/credit) Blank______ to the preferred stock account in the amount of Blank______.

credit; $1,000 Reason: The preferred stock account is credited for the par value of $10 per share. The excess is credited to the Paid-In Capital account.

Cameron, Inc. held 1,000 shares of its own $10 par value common stock purchased for $20 per share. In March, Cameron sold 10 shares at $20 per share. The journal entry to record the sale of treasury stock would include a (debit/credit) ______ to Treasury Stock in the amount of ______.

credit; $200 Reason: Under the cost method, they will credit the Treasury Stock account for the price paid, $20 per share x 10 shares = $200.

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) ______ to Common Stock for ______.

credit; $500

Dane, Inc. purchased 10 shares of its own $5 par value common stock for $20 per share. The journal entry to record this transaction would include a (debit/credit) __________ to the Treasury Stock account in the amount of $

debit; 200

The amount of income earned per each share of a company's outstanding common stock is known as:

earnings per share

A statement of stockholders' equity lists balances of: (Check all that apply.)

retained earnings common stock shares net income cash dividends

A stock ______ is the distribution of additional shares to stockholders according to their percent ownership. When this occurs, the corporation "calls in" its outstanding shares and issues more than one new share in exchange for each old share.

split

The ______ lists the beginning and ending balances of key equity accounts and describes the changes that occur during the period.

statement of stockholders' equity

A ______ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.

stock

The board of directors of Visor, Inc. authorize a Blank______, a distribution of additional shares of the corporation's own stock, to existing shareholders.

stock dividend

A corporation is created by obtaining a charter from:

the state government