Accounting Chapter 13
What are the advantages of a corporation?
- can raise more money than a proprietorship or partnership - has continuous life -transfer of corporate ownership is easy - no mutual agency - stockholders have limited liability
What are the disadvantages of a corporation?
- ownership and management are often separated - the earnings of a corporation may be subject to double taxation - Government regulation is expensive - Start-up costs are higher than other business forms
Why issue stock dividends?
- to continue dividends but conserve cash - to reduce the market price per share of its stock - to reward investors
Dividends
A distribution of a corporation's earnings to stockholder
Declaration Date
Cash dividends become a liability of the corporation
Purchase of treasury stock
Decreases assets and decreases equity - contra equity account
Payment date
Payment of the dividend
Common Stock
Represents the basic ownership of a corporation issuing a common stock in exchange for a building would mean the company should record the building at its market value.
Date of Record
date the corporation records the stockholders that receive dividend checks
The two basic sources of stockholders equity are?
paid-in capital and retained earnings
Outstanding stock
represents shares of stock that are held by the stockholders
Preferred Stock
stock that gives its owners certain advantages over common stockholders, such as the right to receive dividends before the common stockholder and the right to receive assets before the common stockholders if the corporation liquidates
Issued Stock
stock that has been issued but may or may not be held by stockholders
The par value
the amount assigned by a company to a share of its stock
Authorized stock
the max number of shares of stock that the corporate charter allows the corporation to issue