Accounting Chapter 13

What are the advantages of a corporation?

- can raise more money than a proprietorship or partnership - has continuous life -transfer of corporate ownership is easy - no mutual agency - stockholders have limited liability

What are the disadvantages of a corporation?

- ownership and management are often separated - the earnings of a corporation may be subject to double taxation - Government regulation is expensive - Start-up costs are higher than other business forms

Why issue stock dividends?

- to continue dividends but conserve cash - to reduce the market price per share of its stock - to reward investors

Dividends

A distribution of a corporation's earnings to stockholder

Declaration Date

Cash dividends become a liability of the corporation

Purchase of treasury stock

Decreases assets and decreases equity - contra equity account

Payment date

Payment of the dividend

Common Stock

Represents the basic ownership of a corporation issuing a common stock in exchange for a building would mean the company should record the building at its market value.

Date of Record

date the corporation records the stockholders that receive dividend checks

The two basic sources of stockholders equity are?

paid-in capital and retained earnings

Outstanding stock

represents shares of stock that are held by the stockholders

Preferred Stock

stock that gives its owners certain advantages over common stockholders, such as the right to receive dividends before the common stockholder and the right to receive assets before the common stockholders if the corporation liquidates

Issued Stock

stock that has been issued but may or may not be held by stockholders

The par value

the amount assigned by a company to a share of its stock

Authorized stock

the max number of shares of stock that the corporate charter allows the corporation to issue