ACG chap 10

Given the information below, what was the amount of Dividends in the current period? Beginning Retained Earnings = $150,000. Increase in Cash = $40,000. Ending Retained Earnings = $200,000. Issuance of Common Stock = $50,000. Net Income = $160,000.

$110,000

Select all that apply 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 - $110,000 debit to cash - $100,000 credit to preferred 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:

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

Select all that apply Which of the following are included in the duties of the board of directors?

-Appoint officers to manage the corporation. -Establish corporate policies.

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 charter

Select all that apply 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.

Select all that apply 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 convertible 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

Select all that apply The journal entry to record the declaration of a dividend includes ______.

-a debit to Dividends -a credit to Dividends payable

Select all that apply Disadvantages of the corporate form of business are

-additional taxation. -more paperwork

Select all that apply Retained earnings are:

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

Select all that apply Special contractually granted features can make preferred stock:

-convertible -cumulative -redeemable

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 liabilities.

Select all that apply A corporate charter:

-describes the business activities. -names the board of directors. -specifies the shares of stock to be issued.

Select all that apply The advantages to the corporate form of business include

-ease of raising capital. -transferability of ownership.

Select all that apply 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

Select all that apply Preferred stock:

-generally does not have voting rights. -is useful for raising capital without reducing common stockholders' control. -has preference as to dividends.

Select all that apply Preferred stock is advantageous in that it:

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

Select all that apply Stock dividends have the following effects on stockholders' equity

-no change to total stockholders' equity -increase in common stock -decrease in retained earnings

Financial information for Accessories Unlimited includes the following selected data: Dividends (in millions)$75 Shares outstanding (in millions) 300 Stock price$20.00 What is the company's dividend yield?

1.25%. 75/20=3.75/3=1.25

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 Reason: The 45,000 shares outstanding equals the number issued of 50,000 minus the 5,000 shares bought back by the company.

Which of the following transactions are classified as a stock dividend?

A distribution of additional shares of a corporation's stock to current shareholders of the corporation.

Which of the following occurs on the date of record?

A list of shareholders that are entitled to receive a dividend is made.

Describes (a) the nature of the firm's business activities, (b) the shares to be issued, and (c) the composition of the initial board of directors

Articles of Incorporation

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

Blank 1: Invested, Contributed, or Paid-in

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

Blank 1: authorized

Preferred stock has a mixture of attributes of both equity and--

Blank 1: debt, liabilities, bonds, or liability

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

Blank 1: dividends or dividend Blank 2: splits or split

Positive-- represent the key to a company's long-run survival. (Enter only one word.)

Blank 1: earnings, income, profit, earning, profits, or incomes

Return on-- measures the ability of company management to generate earnings from the resources provided by owners.

Blank 1: equity

Dividends payable is-- a(n) account with a normal-- balance and is recorded on the declaration date.

Blank 1: liability Blank 2: credit

The legal capital per share of stock that is assigned when the corporation is first established is referred to as----

Blank 1: par Blank 2: value

The declaration of cash dividends reduces---- . (Enter one word per blank)

Blank 1: retained, stockholders, retain, stockholder's, stockholders', shareholders, shareholder's, or shareholders' Blank 2: earnings, equity, or earning

Shareholders' equity is another common term for-- equity. (Do not use shareholders)

Blank 1: stockholders', owners', or stockholders

Preferred stock:

Can have features of both liabilities and stockholders' equity.

Match the preferred stock feature with the correct description.

Convertible>>Marcus turn in his preferred stock and receives common shares in exchange Redeemable>>Nurbert Inc. demands return of preferred stock at the pre-specified amount Cumulative>>During the current year, Petra Inc. pays dividends that were not declared last year

Match the term with the preferred stock characteristic.

Convertible>>Shares can be converted for common stock Redeemable>>Stocks can be turned in or re-purchased on demand Cumulative>>Dividends not declared during one year are payable when declared in subsequent periods

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

Corporation

The entry to record a large stock dividend would include a:

Debit to Stock Dividends

Match the date with the related event.

Declaration date>>The board of directors officially approves a dividend Date of record>>Stock records are finalized to determine which stockholders are to receive payment Payment date>>Dividends payable is decreased

The declaration and issuance of a stock dividend:

Does not change total assets, liabilities, or total stockholders' equity.

Corporate earnings are taxed twice—at the corporate level and individual shareholder level.

Double Taxation

Match the source of capital with the account in which it is recognized. Instructions

Earned capital>>Retained earnings Invested capital>>Common stock

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

False Reason: A corporation is owned by its shareholders, who are equity holders.

The first time a corporation issues stock to the public.

Initial Public Offering

Shareholders can lose no more than the amount they invest in the company.

Limited Liability

Like an S corporation, but there are no limitations on the number of owners as in an S corporation.

Limited Liability Company

The issuer of a 5% common stock dividend (small stock dividend) to common stockholders should debit stock dividends for an amount equal to the

Market value of the shares issued.

ROE relates ______.

Net Income / Average Stockholders' Equity

Traces the line of authority within the corporation.

Organization Chart

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

Preferred stock

A noncash asset that is distributed to stockholders is referred to as a:

Property dividend.

Has stock traded on a stock exchange such as the New York Stock Exchange (NYSE).

Publicly Held Corporation

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

ROE

Which of the following ratios measures the ability of company management to generate earnings from the resources owners provide?

Return on equity

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

Right to vote Reason: Stockholders have a right to dividends when distributed, but not necessarily every year.

Allows for legal treatment as a corporation, but tax treatment as a partnership.

S Corporation

Which financial statement summarizes the changes in the balance of each stockholders' equity account?

Statement of stockholders' equity only

Match stock splits and stock dividends with their characteristics.

Stock splits>>Cause the par value per share to change Stock splits and stock dividends>>Cause total stockholders' equity to remain the same Stock dividends>>Require a journal entry

Why doesn't stockholders' equity equal the market value of equity?

Stockholders' equity usually does equal the market value of equity.??

The PE ratio:

Tends to be higher for growth stocks.

True or false: The board of directors is responsible for establishing corporate policies.

True Reason: The board of directors establishes company policies and appoints officers.

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

articles of incorporation

Preferred stock tends to have attributes of

both bonds and common stock.

Additional taxes and more paperwork are the two primary disadvantages of this business form:

corporation

Dividends payable is recorded as a credit on the

declaration date

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

declared; balance sheet and statement of retained earnings

A distribution of a company's accumulated prior earnings is a(n) ______.

dividend

The amount of dividends paid out relative to the share price is referred to as:

dividend yield

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

dividend.

The dividend yield is calculated by dividing:

dividends per share by the stock price per share

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

does not have; has

Par value has a direct relationship to the market value of the common stock.

false

The stockholders' equity section of the balance sheet shows how each equity account changed during the year.

false

No-par value stock is common stock that:

has not been assigned a par value

Preferred stockholders:

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

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 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

Earnings per share measures the ______ earned per share of common stock

net income

Stock splits have the following effects on stockholders' equity

no change to total stockholders' equity

Common stock that has not been assigned a par value is referred to as:

no-par stock

Large stock dividends are recorded at _______ and small stock dividends are recorded at ______.

par value; market value

Earnings per share measures the net income earned

per share of common stock.

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

The purpose of the statement of shareholders' equity is to

report the changes and the sources of the changes in shareholder equity accounts.

A company's past profits that are not paid out in dividends are ______.

retained earnings

Earned capital increases ____.

retained earnings

Diva, Inc. declared and paid $10,000 of dividends in 2018. The dividends result in a reduction of

retained earnings.

Who owns and controls a corporation?

shareholders

Another common term for stockholders' equity is:

shareholders' equity

The number of shares issued represents the number of shares:

sold

Which of the following will decrease the par value of shares?

stock split reason: bec 1/2=0.5

The term treasury stock refers to

stock that is repurchased by the issuing corporation.

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.

Historically, par value was considered to be

the value of the company's shares of stock.

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

treasury stock.

A company credits Additional Paid-in Capital for the portion of the cash proceeds above par value received for the issuance of stock.

true

Convertible preferred stock allows the stockholder to convert shares of preferred stock into common stock at a specified conversion ratio.

true

If a company has expenses that are more than revenues, the net loss decreases retained earnings.

true

If a company purchases shares of another company, it records this transaction as treasury stock.

true

Total assets, total liabilities, and total stockholders' equity do not change as a result of a stock dividend.

true

We calculate earnings per share as net income divided by the average shares outstanding during the period.

true

We record treasury stock at the cost of the shares acquired.

true

Shareholders influence a company by

voting for the board of directors.