LearnSmart CH 11

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Shares that were previously issued to and owned by stockholders but have been acquired and now held by the corporation are called ___________________?

Treasury Stock

Sources of financing for corporations include _______________________?

-borrowing -issuing stock

The journal entry to record re issuing treasury stock as a price below the cost of the treasury includes a _____________________?

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

Mega Corporation repurchased 1,000 shares of its $1 par value common stock for $8000. The effect on this transaction on the accounting equation includes a ___________________?

-decrease in SE -decrease in Assets

An IPO _________________________?

-stands for Initial Public Offering -is when a private company goes public

Before the board directors declares a cash dividend, it should consider whether ______________________?

-there is sufficient cash -there are sufficient retained earnings

Anuu, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. Anuu repurchased 10,000 of these shares. The number of shared issued equals?

100,000

Items such as unrealized gains and losses from pensions, foreign currencies or financial investments are reported as _________________?

Accumulated other Comprehensive Income

If the application to create a corporation is approved, the state issues a charter, also called the ______________________________, which spells out information about the corporation?

Articles of Incorporation

Treasury stock is a _______________________ account?

Contra-Equity

____________________________, also called paid in capital, reports the amount of capital the company received from investors.

Contributed Capital

A company _________________ have a legal obligation to pay dividends?

DOES NOT

An advantage of _____________________ is interest is tax deductible.

Debt Financing

Dividends Payable is a __________________ account with a normal ______________ balance and is initially recorded on the ______________________ date?

Liability, Credit, Declaration

_______________________ shares equals the number of shares _________________ minus the number of shares repurchased by the company?

Outstanding, Issued

A common stocks ________________________ is typically set at a low amount and has little meaning today other than being used by some states to process fees?

Par Value

Dividends are closed into __________________ at the end of the fiscal year?

Retained Earnings

Corporations can raise large amounts of money because ______________________?

Shares of stock in public companies can easily be bought and sold by investors

Why might a company want to repurchase its stock from existing stockholders?

To obtain shares to reissue to employees as part of employee stock purchase plans

True or False: A corporation exists separate from its owners, which means it doesn't die when its owners die?

True

True or False: No gain or loss is reported when treasury stock is reissued because GAAP does not consider transactions between corporation and its owners to be profit making?

True

True or False: Some states allow corporation to issue No-Par Value common stock?

True

When a company re issued shares at a higher price than the cost to previously purchase the treasury stock, it records a ______________________________?

credit to Additional Paid in Capital

When a company reissues shares at a price lower than the cost to previously purchase the treasury stock, it records a ______________________?

debit to Additional Paid in Capital

The date of record is the date of which the corporation ___________________?

finalized its list of stockholders who will receive dividends

The laws governing corporations allow a company to be _______________________________?

incorporated in a different state from the one which it operates

StockIt, Inc. issued 100,000 shares of the 1,000,000 shares authorized. StockIt has repurchased 10,000 of its shares. The number of shares authorized represents the _____________________________?

maximum number of shares StockIt is allowed to issue

Stock options are given to _______________________?

provide incentives for employees to work harder

What are the benefits of common stock?

-A residual claim on assets after creditors and preferred stockholders have been satisfied. -A preemptive right to buy newly issued stock before it is offered to others -The right to receive dividends if they are declared -Voting Rights

The effect of the accounting equation of declaring a cash dividend includes ___________________?

-An increase in liabilities -A decrease in SE

The declaration of dividends results in ___________________________?

-An increase in liabilities -A decrease in retained earnings after temporary accounts are closed -An increase in dividends

A corporation may be restricted from paying a dividend if ______________________?

-a creditors loan agreement has been violated -the dividend is greater than the amount of retained earnings

The journal entry to record the payment of a previously declared dividend includes a ____________________?

-a debit to Dividends Payable -a credit to Cash

Transactions between a company and its stockholders affect the company's _________________ accounts only?

Balance Sheet

Dilution Solutions, Inc. repurchased 1,000 shares of its $1 par value common stock for $5000. The journal to record this transaction includes a $5000 _______________ to treasury stock?

Debit

True or False: When a corporation declares a dividend its net income on the income statement is reduced?

False: Dividends DO NOT affect net income

A major advantage of the corporate form of ownership is ______________________?

Limited Legal Liability

A corporation is a _______________________ and can own assets, incur liabilities, and enter into contracts.

separate legal entity

What type of investment pays little or no dividends?

Growth Investment

A ____________________________ refers to the very first issuance of a company's stock to the public?

Initial Public Offering

Retained earning of $100,000 represent a corporation cumulative earnings ________________ and is shown on the _______________________?

Kept; balance sheet and statement of retained earnings


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