A304 Chapter 11 Smartbooks

An IPO stands for a(n) ______ offering

initial public

X-Co issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $100 cash per share. The journal entry to record this event includes a

$100,000 debit to Cash $100,000 credit to Preferred Stock

Wyanot Company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $110 cash per share. The journal entry to record this transaction includes a Blank

$110,000 debit to Cash $100,000 credit to Preferred Stock $10,000 credit to Additional Paid-in Capital - Preferred

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 shares issued equals Blank______ shares

100,000

Lox, Stock and Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares.

4,500

Which of the following accounts are classified as stockholders' equity?

Common stock Retained earnings Paid-in capital

If a company repurchases its shares of stock, the shares are reported as

a contra equity account—treasury stock

Common stock's par value is

an insignificant amount specified in the corporate charter

The effect on the accounting equation of reissuing treasury stock causes total

assets to increase stockholders' equity to increase

Preferred stock carries priority over common stock

both for dividends and at liquidation

Ownership structure can vary from one company to another, but the most basic form of corporation offers

common stock

Treasury stock is reported in the financial statements as a(n)

contra equity account

T-balls, Inc. bought 1,000 shares of its own stock for $11 per share. Later it reissued all 1,000 shares for $10 per share. The effect of reissuing the treasury stock includes a(n)

decrease in additional paid-in capital of $1,000 increase in total assets of $10,000

A distribution of a company's accumulated prior earnings is a(n)

dividend

A corporation's board of directors could prefer a stock split to a stock dividend because a stock split

does not reduce retained earnings, so it does not reduce the ability to declare a cash dividend in the future

The statement of stockholders' equity reports

the changes in each shareholder equity account

Par value is also referred to as

legal capital

A current dividend preference requires that

preferred dividends must be paid before any dividends are paid to common stockholders

Vests, Inc. has 1,000 shares of 5%, par $100 preferred stock and 10,000 shares of $1 par value common stock outstanding. If the common stockholders received $2 per share in dividends, then the preferred stock dividend was Blank______ per share.

$5 $5 = $100 par value x 5% dividend rate

Atomic, Inc. had 10,000 shares of $1 par value common stock outstanding prior to a 2-for-1 stock split. As a result of the stock split

20,000 shares are outstanding with a $0.50 par value

Which of the following are included in Accumulated Other Comprehensive Income but are not included in Net Income on the income statement?

Foreign currency translation gains or losses Certain unrealized holding gains or losses

Vests, Inc. has 1,000 shares of 5%, par $100, non-cumulative preferred stock and 10,000 shares of $1 par value common stock outstanding. Vests declared a $12,500 dividend. How much of the dividend is allocated to the preferred and common shares?

$5,000 is allocated to the preferred stock. $7,500 is allocated to the common stock.

Wok N Roll, Inc. began on January 1, Year 1 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of $100 par value, 5%, cumulative preferred stock. No dividends were declared in Year 1 or Year 2. In Year 3, Wok N Roll declared and paid a $0.50 dividend to its common stockholders. Assuming all shares originally issued are outstanding, the total dividend declared and paid in Year 3 equals

$65,000 Cumulative preferred stock receives 1,000 shares x $100 par x 5% x 3 years and common stock receives 100,000 shares x $0.50.

Stockable, Inc. began business on January 1 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of 6%, noncumulative, $100 par value preferred stock. No dividends were declared in the first year of operations. In the second year of operations, Stockable declared and paid a $0.50 dividend to its common stockholders. Which of the following is true?

Stockable, Inc. has no legal obligation to pay a dividend to preferred stockholders in the first year of operations.

In an IPO of shares, Timmy Hilfigure purchased 1,000 shares of Abner Crummie, Inc. for $5,000. Eight years later, Timmy Hilfigure sold the 1,000 shares for $8,000 to Ralph Loring. How does the sale from Timmy to Ralph impact Abner?

Abner Crummie, Inc., will not be directly affected by this transaction.

A company is owned by its

shareholders

After a 3-for-1 stock split, the par value of each stock is Blank______ the par value prior to the split.

one third

Double Vision, Inc. had 10,000 shares issued and outstanding of its $1 par value common stock. Total common stock equaled $10,000, Retained earnings equaled $20,000 and Total stockholders' equity equaled $50,000 prior to a 2-for-1 stock split. As a result of a 2-for-1 stock split

par value equals $0.50.

Atomic, Inc. had 100,000 shares authorized, and 10,000 shares issued and outstanding of its $2 par value common stock. At December 31, Common Stock equaled $20,000 and total stockholders' equity equaled $100,000 prior to a 2-for-1 stock split. As a result of a 2-for-1 stock split,

par value equals $1 the number of shares outstanding equals 20,000 the Common Stock equals $20,000 stockholders' equity equals $100,000

Investors earn a return on stock investments by

receiving dividends selling the stock for more than its cost

An IPO

stands for initial public offering is when a private company goes public

One invests in _______ with the expectation of receiving dividends and price appreciation. (Enter one word per blank.)

stock

Which of the following receive dividends if declared?

stockholders

On January 1, Year 1, Bank & Rupp, Inc. issued 100,000 shares of $1 par value common stock and 1,000 shares of $50 par value, 6%, cumulative preferred stock. No dividends were declared in Year 1. In Year 2, Bank & Rupp declared and paid a $1 dividend to its common stockholders. Assuming all shares originally issued are outstanding, the total dividend paid to the preferred stockholders equals

$6,000 Since the preferred stock is cumulative, $6,000 (=1,000 shares x $50 par x 6% x 2 years) must be paid to preferred stockholders before the common stockholders may receive a $1 dividend.

Investors who acquire preferred stock

generally do not have voting rights have preference as to dividends that is cumulative have the right to receive dividends in arrears once dividends are declared

Preferred stockholders

have the right to receive dividends only in the years the board of directors declares dividends

Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $110 in cash per share affects the accounting equation by

increasing Additional Paid-in Capital increasing total stockholders' equity increasing total assets

When a shareholder of Limited, Inc. sells its shares to another investor on the stock exchange, Limited, Inc.'s accounting equation

is not affected because the corporation is separate from its owners

True or false: Certain unrealized holding gains or losses and foreign currency translation gains or losses are included in Accumulated Other Comprehensive Income but are not included in Net Income on the income statement.

true

Common stock's par value

was introduced to prevent bankrupt companies from unfairly distributing company resources has become less meaningful because states use other means to prevent stockholders from removing capital from financially distressed companies affects how common stock is recorded

Treasury stock

is stock that is no longer outstanding has a negative equity balance is a contra-equity account

Preferred stock

is useful for raising capital without reducing common stockholders' control has preference as to dividends generally does not have voting rights

The number of shares outstanding equals the number of shares

issued minus the number of shares in treasury