chapter 11 AC 210
100 shares; $1 par value, 5$ per share. effect of this transaction on financial statements
-stockholders equity on B/S increases - financing activities section of the statement of cash flows increase
higher ROE means
-the company used financial leverage to its stockholders advantage -stockholders may enjoy higher returns
reissued 1000 shares of T.S for 10,000 prior T.S was 12,000, which included the 8,000 cost of the 1000 shares.
-treasury stock on the balance sheet will equal 4,000 -stockholders equity on the balance sheet will be 10,000 higher
preferred stock carries priority over common stock
both dividends and at liquidation
when diva declared a 10,000 cash dividend, it recorded a debit to _____ and a credit to dividends _______.
dividends; payable
P/E ratio is calculated by ?
dividing stock price by EPS
accumulated defict ?
- R.E has a debit balance - indicates accumulated net loss - is shown in () on the balance sheet
R.E. column of S.E
- dividends: common - dividends: preferred - net income
issued 10,000 shares of $1 par value common stock at $10 per share. journal entry = ?
-100,000 debit to cash -90,000 credit to additional -10,000 credit to common stock
the closing entry required at year end includes a ?
-debit to R.E -credit to dividends
increase 2 percentage points to 12%. increase may have happened because?
-generated more profits than the interest incurred on its borrowed funds -replace its 12% debt with 10%
advantages of debt financing over equity include ?
-interest payments are tax deductible -stockholders control will not be diluted
dividends on preferred stock ?
-may be paid at a fixed rate -are more attractive than common stock dividends to investors who want a stable income -are paid before dividends on common stock
1000 shares of own stock for $8. reissued shares for 10,000. treasury stock ?
10,000 increase in stockholders equity 2,000 (10,000 - 8000)
issued 100,00 shares of its 5%, 100 par value, cumulative preferred stock for 100 cash per share. journal entry to record this event includes a ?
100,000 debit to cash 100,000 credit for P.S.
1,000 shares of its 5%, 100 par value, cumulative preferred stock for $110 cash per share. journal entry?
110,000 debit to cash 10,000 credit to add paid 100,000 credit to preferred stock (1,000 x 100)
bought 1000 shares of its own stock for 8000. reissued the shares for 10,000. journal entry record the sale of treasury stock includes ?
8000 credit to treasury 2000 credit to add paid in capital
total assets= 100,000 liabilities= 60,000 S.E.= 40,000 before repurchasing 1000 shares of its $1 par value common stock for $5 each. after the repurchase the total assets =?, liabilites =?, S.E. = ?
95,000; 60,000; 35,000 100,000- (1,000x 5)
stock splits
cause the par value per share to change
stock splits and stock dividends
cause total stockholders equity to remain the same
EPS is a good predictor of ?
future stock prices
preferred stockholders
have the right to receive dividends only in the years the board of directors declares dividends
shares outstanding equals?
issued - treasury
under IFRS, if the company issuing preferred stock is contractually obligated to pay dividends or to redeem the shares at a future date, then the preferred stock is classified as
liability
ROE relates
net income to the average common stockholders equity
EPS = _______ divided by the average shares of common stock outstanding
net income- preferred dividends
after a 3-for-1 stock split, the par value of each stock is ______ the par value prior to the split.
one third
stock dividends
require a journal entry
the number of shares issued represent the number of shares ?
sold
treasury stock is reported in the ?
stockholders equity section of the balance sheet
contributed capital of 1,000,000 is found in the ______ section of the ______?
stockholders equity; balance sheet
