ch11 preclass

Cloud Company has 5,000 shares of 6%, $20 par value cumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2. If Cloud pays $30,000 of cash dividends in Year 3, preferred stockholders will receive ______.

$18,000

Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. This was reported as ______ activities.

$24,000 of cash inflow from financing

Thomas Company has $120,000 of assets, $40,000 of liabilities, $50,000 of stock, and $30,000 of retained earnings. Investors own 25,000 shares of Thomas' stock with a current market value of $5.20 per share. Based on this information, the book value per share is ______.

$3.20 ($50,000 stock + $30,000 ret. earn.) / 25,000 shares

Cloud Company has 5,000 shares of 6%, $20 par value noncumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2.If Cloud pays $30,000 of cash dividends in Year 3, preferred stockholders will receive ______.

$6,000

Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Immediately after the issue, Base Line's balance sheet reported ______ of paid-in capital in excess of par value.

$90,000 $24 issue price - $15 par value = $9 in excess of par x 10,000 shares = 90,000

Match the account title shown in the right column with the order in which they are presented in the stockholders' equity section of a balance sheet. Use the number 1 to represent the account title shown first, the number 2 to represent the second title, and so on.

1 - Par value preferred stock 2 - Stated value common stock 3 - Class B common stock 4 - Paidin capital in excess of par value preferred stock 5 - Paidin capital in excess of stated value common stock 6 - retained earnings

True or false: The PCAOB Act of 2002 was adopted to address a number of high-profile business failures.

False

True or false: The stated value of a share of stock is established by the federal government.

False

The issue of no-par common stock affects the ______.

Statement of Cash Flows Balance Sheet

True or false: Partnerships and proprietorships are usually managed by their owners.

True

Stanley Company paid $25 per share to purchase 200 shares of its $10 par value common stock.When Stanley resells 100 shares of the treasury stock for $30 per share ______.

a $500 increase in additional paid-in capital from treasury stock will be recorded assets will increase by $3,000

The departure of owner(s) does not terminate _____.

a corporation

Cumulative dividends ______

accumulate for future payment when unpaid may also be called dividends in arrears

Purchasing treasury stock is a(n) ______ transaction.

asset use

The maximum number of shares of stock corporations are legally permitted to issue is called ______ shares.

authorized

Book value per share is ______.

calculated by dividing total stockholders' equity by the number of shares of stock owned by investors measured in historical dollars

The PCAOB ______.

can impose sanctions for violations of its rules, laws, and standards was created by the Sarbanes-Oxley Act of 2002

The sale of treasury stock is a(n) ______.

capital acquisition

The greatest potential for rewards when a corporation prospers rests with ______ stockholders.

common

The benefit of limited liability is a significant reason for the popularity of the ______ form of business structure.

corporate

It is easiest to transfer ownership in a ______.

corporation

Continuity of existence is an advantage of ______.

corporations

Stock certificates are used as evidence of ownership in ______.

corporations

The ability to generate billions of dollars of capital by pooling the resources of millions of owners through public stock and bond offerings is only available to ______.

corporations

The greatest opportunity to raise capital is available to ______.

corporations

The journal entry to record the purchase of treasury stock includes a ______.

credit to cash debit to treasury stock

The journal entry to record the issue of $10 par value stock for $25 cash includes a ______ account.

credit to the common stock debit to the cash credit to the paid in capital excess of par value

The journal entry to record the issue of no par stock for $25 cash includes a ______ account.

debit to the cash credit to the common stock

The journal entry to record the issue of $10 par value stock for $25 cash includes a ____ to cash, a ____ to common stock, and a ____ to additional paid in capital in excess of par value account.

debit, credit, credit

The journal entry to record the issue of $10 stated value stock for $25 cash will include a ____ to cash, a ____ to common stock, and a ____ to additional paid in capital in excess of stated value account.

debit, credit, credit

When a company issues no-par common stock, the ______.

entire proceeds are recorded in the Common Stock account cash inflow is classified as a financing activity

Double taxation refers to the fact that ______.

income is taxed at both the corporate level and when stockholders receive dividends

Common reasons corporations purchase treasury stock include to ______.

keep the price of the stock high when it appears to be falling avoid a hostile takeover have stock available to satisfy the requirements of employee stock option plans

A chief advantage of the corporate form of business is ______.

limited liability

Book value per share is ______.

measured in historical dollars calculated by dividing total stockholders' equity by the number of shares of stock owned by investors

Transferring the ownership of a proprietorship is difficult because ______.

most proprietorships are owner operated a buyer must purchase the entire business

Par value ______.

multiplied by the number of shares of stock issued represents legal capital represents the maximum liability of the investors

Corporation are ______ required to declare dividends.

not

Preferred stock ______.

often has a liquidation value frequently has a dividend guarantee dividends are paid before common stock dividends

When a corporation buys treasury stock, the number of shares of stock ______.

outstanding decreases authorized is not affected

In the stockholders' equity section of the balance sheet, ____ stock is normally listed before ____ stock.

preferred, common

Owner contributions and retained earnings are combined in a single capital account on the balance sheets of ______.

proprietorships

The term withdrawal may appear in the financial statements of ______.

proprietorships partnerships

The party that owns the stock on the date of ______ is legally entitled to a cash dividend.

record

Common stockholders have the right to ______.

share in the distribution of profits participate in the election of directors vote on significant matters that affect the corporate charter

An organization owned by a single individual who is responsible for making business and profit distribution decisions is called a(n)

sole proprietorship

An arbitrary amount established by the board of directors of a corporation assigned to no-par stock is called

stated value

The highest level of organizational authority in a corporation is represented by ______,

stockholders

Base Line Incorporated is authorized to issue 50,000 shares of $15 stated value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. As a result of the stock issue ______.

the income statement was not affected total assets increased by $240,000 cash flow from financing activities increased by $240,000

authorized stock

the maximum number of shares a company can legally issue

outstanding stock

the number of shares currently owned by investors

treasury stock

the number of shares of stock that a company has repurchased from its investors

issued stock

the total number of shares the company has sold to investors

When a corporation purchases its own stock, the stock purchased is called ______ stock.

treasury

Distributions to owners of proprietorships are called

withdrawals