CH. 18 Studybook

when a corporation issues shares of common stock for an amount above par, which of the following entries occur?

- credit to common stock -credit to additional paid-in capital

which of the following accounts are classified as shareholders' equity?

- preferred stock - net unrealized holding gains on investments - additional paid-in capital

which of the following accounts might a corporation use to record changes in its ownership interests during a reporting period

- retained earnings - common stock - accumulated other comprehensive income

corporations raise equity capital by

= operating at a profit = issuing stock

owners of __________ corporations have the limited liability of a corporation, but income and expenses are passed through the owners as in a partnership, avoiding double taxation

S

retained earnings is typically reported on the balance sheet

as a single amount

ex-dividend date

date before which investors must purchase stock in order to receive a dividend

record date

date that a determination is made as to recipients of a dividend

payment date

date that corporate assets are transferred to shareholders

declaration date

date that the corporate board of directors announces a dividend

cash and property dividends __________ total equity, and stock dividends _________ total equity

decrease; do not effect

when a corporation repurchases its stock as treasury stock, the number of shares authorized

does not change

in corporation, shareholders' liability is

limited to the amount of the investment

a reverse stock split requires

no journal entry

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

the effect of share issue costs is to

reduce paid-in capital in excess of par

large stock dividend

reduce retained earnings by par; increase common stock by par

small stock dividend

reduce retained earnings for fair value; increase common stock by par value; increase additional paid-in capital

property dividend

reduce retained earnings, recognize gain on appreciation on income statement

net assets equals

shareholders' equity

when a company repurchases its own securities without formally retiring them, the stock us recorded in which account?

treasury stock

which of the following accounts are classified as shareholders' equity

= common stock = additional paid-in capital = retained earnings

a business that has equity accounts labeled "common stock" and "retained earnings" is a

corporation

true or false: when investors purchase shares of stock from a corporation, it is recorded by the corporation as investment in securities

false (paid in capital)

a 2-for-1 stock split increases the marketability of the stock because

the market price per share decreases

the purpose of the statement of shareholders' equity is to

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

when a company issues difference classes of shares, it must

distinguish the rights for each class of stock

true or false: a corporation is owned by debt and equity holders

false ( a corporation is owned by its shareholders, who are equity holders)

_______ include(s) all changes in equity during a period except those resulting from investments by owners and distributions to owners

comprehensive income

which type of stock usually has a high par value and a percentage of par value dividend rate?

preferred stock

a nonreciprocal transfer to owners is referred to as a

property dividend

cash dividend

reduce retained earnings; reduce a current asset

when a company repurchases its stock and immediately retires the stock, which of the following occurs?

the equity accounts are reduced for the amount in which the shares were originally sold

who regulates the nature of shares that can be authorized, the issuance and repurchase of those shares, and the distribution to shareholders?

the state in which the corporation is incorporated

preferred stock is similar to a bond when it has which of the following features?

- a mandatory redeemable feature - a dividend rate

historically, par value was considered to be

the amount of net assets that were not available for distribution to shareholders

the date on which a cash dividend becomes a liability to a corporation is the

-declaration date

a restriction of retained earnings signifies that

a portion of retained earnings is not available for dividends

the costs for legal, promotional, and accounting services to issue stock should be

subtracted from the proceeds of issuing stock

brandon issues 1000 shares of $5 par value common stock for $20 per share. stock issue cost are $500. the journal entry to record the issuance of stock will include which of the following entries?

- credit common stock $5000 - debit cash $19500 - credit additional paid-in capital $14500

in year 1, goal corp. purchases 1,000 shares of treasury stock for $10 per share. in year 2, goal reissues 500 shares of the treasury stock for $13 per share. in year 3, goal reissuance of treasury stock for $8 per share. the journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries?

- debit paid-in capital - treasury shares of $400

in year 1, rim corporation purchases 1,000 shares of treasury stock for $10 per share. In year 2, rim reissues 100 shares of the treasury stock for $12 per share. in year 3, rim reissues 500 shares of its treasury stock for $9 per share. the journal entry to record the reissuance of treasury stock in year 3 will include which of the following entries?

- debit retained earnings 300 - debit cash 4500 - credit treasury stock $5000 - debit paid-in capital- share repurchase $200

preferred stockholders usually have preference over common stockholders with respect to which items?

- dividends - distribution of assets in liquidation

carnival issues 10,000 shares of $1 par value common stock for $10 per share. stock issue cost are $3,000. the journal entry to record the issuance of stock will include a credit to

additional paid-in capital for $87,000

net assets is

assets less liabilities

which of the following is subject to double taxation?

corporations

mueller company issues one share in exchange for two outstanding shares of common shares. mueller must have has a:

reverse stock split

if a corporation issues its shares of stock for a noncash asset, at what amount should the transaction be recorded

the fair value of the stock

which of the following accounts might a corporation use to record change in its ownership interests during a reporting period?

= accumulated other comprehensive income = common stock = retained earnings

when a company issues its shares of stock for a noncash asset, which of the following may provide evidence of fair value of the transaction?

= the amount of cash that would be paid to purchase the asset = an independent appraisal of the value of the asset = the quoted market price for the shares

when a company issues its shares of stock for a noncash asset, which of the following may provide evidence of fair value of the transaction

= the amount of cash that would be paid to purchase the asset = the quoted market price for the shares = an independent appraisal of the value of the asset

mandatorily redeemable preferred stock is reported as

a liability on the balance sheet

when common stock has a designated par value, and common stock is issued at an amount above par, which entry is recorded?

credit common stock for the par amount

if preferred shares must be redeemed by a certain date, they should be classified as

debt

when a corporation issues two securities for a single price, how is the issue price usually allocated?

the cash received is allocated based on the relative market value of each security

true or false: treasury stock represents investments in treasury securities of the U.S. government

false ( treasury stock represents shares of stock previously issued by the corporation that are repurchase by the corporation)

when the dividend exceeds the balance in retained earnings, the excess is referred to as a _______ dividend

liquidating

what type of corporations include churches, hospitals, universities, and charities

not-for-profit

when investors purchase shares of stock, it is classified as

paid-in capital

a corporation's accumulated, undistributed net income or loss is referred as

retained earnings

amounts earned by the corporation on behalf of its shareholders are referred to as

retained earnings

a company that repurchases its own securities accounts for the shares of stock as

retired shares of treasury shares

state laws regulate which of the following corporate activities

= nature of share authorization = issuance of stock = repurchase of stock

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

the date on which the board of directors announces that a dividend will be paid is referred to as the

declaration date

cash and property dividends __________ total equity, and stock dividends _____ total equity

decrease; do not effect

when a company repurchases shares held as treasury stock, the number of shares outstanding _______

decreases

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

dividend