chapter 11 Stock holders equity

the laws governing corporations

allow a company to be incorporated in a different state from the one in which it operates

the owners of a _____ are not personally responsible for the debts of the business

corporation

dilution solutions inc repurchased 1000 shares of its $1 par value common stock for 5000. the journal entry to record this transaction includes a $5000 _____ to treasury

debit

similar to stock split, a stock ____ also distributes additional shares of stock to exiting stockholders on a pro rata basis at no cost to the stockholders

dividend

preferred stock generally ____ preference as to dividends

has

preferred stock is advantageous in that it

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

investors who acquire preferred stock

have preference as to dividends and over common stockholders

stock options are expensed

when granted and are recorded at the estimated cost of the option

t-balls inc bought 1000 shares of its own stock for 11 per share. later it reissued all 1000 shares for 10 per share. the effect of reissuing the treasury stock includes an ______

~ decrease in additional paid in capital of 1000 ~ increase in total assets of 10,000

the risk from financial leverage ____

~ increases when the cost of borrowing is greater than the return ~ decreases when a company issues new shares of stock

the declaration and payment of a cash dividend ultimately causes a _______

~decrease in cash ~decrease in retained earnings ~decrease in stockholders equity

treasury stock

~reduces total stockholders equity ~is a contra equity account ~ is shares of stock no longer outstanding

advantages of debt financing over equity financing include that

~stockholders control will not be diluted ~interest payments are tax deductible

a higher ROE means

~stockholders may enjoy higher returns ~ the company used financial leverage to its stockholders advantage

preferred stock carries priority over common stock

both for dividends and at liquidation

sources of financing for corporations include

issuing stock and borrowing

a major advantage of the corporate ownership is ______ legal liability

limited

cumulative preferred stock is entitled to recieve current dividends plus "dividends in _____" before any future common dividends can be paid

arrears

dividend payment date is when

cash is paid to satisfy the dividend liability

stock splits

cause the par value per share to change

stock splits and stock dividends

cause total stockholders equity to remain the same

daffy duct inc declared a small stock dividend and issued a 1000 shares of $1 par value common stock when the price of the stock was $4 each. identify all appropriate account titles that may be used to record this issuance of stock

common stock, retained earnings, additional paid-in capital

EPS is a good predictor of

future stock prices

stock dividends

require a journal entry

the journal entry to record reissuing tresury stock at a price below the cost of the treasury stock includes a _____

debit to cash, debit to additional paid-in capital credit to treasury stock

which of the following line item amounts would be under the retained earnings column of a statement of stockholders equity?

dividends: preferred and common, net income,

dew drop inn inc has a current ratio of 0.9 to 1.0 and $4 of debt for every $1 of equity. if Dew Drop inn needs additional financing, it would best improve its financial situation with

equity financing

shares outstanding equals shares ______ minus ____ shares

issued; treasury

retained earnings represents cumulative _____ by the business

profits retained and net income kept

a company's past profits that are kept instead of being paid to stockholders are

retained earnings

dividends is closed into _____ _____ at the end of the fiscal year

retained earnings

stockable inc began business on January 1, 2018 issuing 10,000 shares for 1 par value common stock and 1000 shares of 6% noncumulative, $100 par value preferred stock. no dividends were declared in 2018. in 2019, stockable declared and paid .50 dividend to its common stockholders. which is true?

stockable inc has no legal obligation to pay a dividend to preferred stockholders in 2018

ima rich purchased 100 chares of stockits, incs $1 par value common stock from stockits for $5 per share. which statements are true regarding the effect of this transaction on stockits financial statements?

stockholders equity on the balance sheet increases the financing activites section of the statement of cash flows increases

treasury stock is reported in the

stockholders equity section of the balance sheet

duffy duct inc, issued 10,000 shares of $1 par value common stock at $10 per share. the journal entry to record this transaction includes a ______

~100000 debit to cash ~90,000 credit to additional paid in capital ~10,000 credit to common stock