Accounting Chapter 11
What often causes a corporation to authorize a buyback? (11-2)
A corporation believes that its stock is undervalued by the stock market.
treasury stock
A corporation's own stock that has been reacquired by the corporation and is being held for future use.
Retained earnings
An amount earned by a corporation and not yet distributed to stockholders.
How is the account Marketable Securities classified? (11-3)
As a Current Asset
How is the account Dividend Revenue classified? (11-3)
As an Other Revenue account.
How is the account Gain on Sale of Investments classified? (11-3)
As an Other Revenue account.
What is the normal balance of the account Stock Dividends Distributed? (11-1)
Credit
What transaction is recorded on the data of record? (11-1)
No transaction is recorded on the date of record.
Why does a corporation record a liability when a dividend is declared? (11-1)
When a board of directors declares a dividend, the corporation is obligated to pay it.
declaring a dividend
action by a board of directors to distribute corporate earnings to stockholders
buyback
approved by board of directions authorizing the corporation to repurchase its stock
Dividends
corporate earnings distributed to stockholders
What is the normal balance of the Treasury Stock account? (11-2)
debit
date of payment
the date on which dividends are actually to be paid to stockholders
date of record
the date on which dividends are actually to be paid to stockholders
stock dividend
the payment of a dividend with the stock of the corporation
date of declaration
Date the directors vote to pay a dividend.
What are the accounts for the equation Paid cash for annual dividend declared on dec 15 $10,000
Dividend payable (10,000)
What are the accounts for the equation Hariton's board of directors declared an annual dividend of 10,000 Memo 456
Dividend- Common (60,000) Dividend- Preferred (40,000) Dividend Payable (10,000)
How does treasury stock affect the amount of dividends paid by the corporation? (11-2)
Dividends are not paid on treasury stock.
What term is used to describe a stock purchased after the data of record? (11-1)
Ex-dividend.
Who determines when and what amount of retained earnings a corporation will distribute as dividends? (11-1)
The board of directors.
How do remaining stockholders benefit from a buyback? (11-2)
The net income of the corporation is divided among fewer shares.
Describe the effect of a stock dividend on the stockholders the corporation (11-1)
The stockholders do not receive anything of value. The transaction increases the number of shares outstanding. Each stockholder retains his or her share of the corporation. The stock dividend transfers amounts among equity accounts. The market price per share of the stock will decline.
Why would a corporation purchase the capital stock of another corporation? (11-3)
To earn a return on its cash assets until the cash is required for reinvesting in the business, paying a dividend, or reducing liabilities