ACCT 225 chapter 10
A distribution of a company's accumulated prior earnings is a(n)_______
dividend
The advantages to the corporate form of business include
ease of raising capital and transferability of ownership
Limited liability and ease of raising outside capital are advantages of this business form
corporation
double taxation is a disadvantage for
corporations
When common stock has a designated par value, and common stock is issued at an amount above par, which entry is recorded?
credit common stock for the par amount
Preferred stock:
is useful for raising capital without reducing common stockholders' control and generally does not have voting rights and has preference as to dividends.
The number of shares outstanding equals the number of shares______
issued minus in treasury
corporations raise capital by
issuing stock
a corporation is owned by
its shareholders
small stock dividend
less than 25% of the outstanding shares of stock
most important advantage to the corporate form of a business is
limited liability
In a corporation, the stockholders' potential loss is:
limited to the amount of the investment
A small stock dividend is valued at
market value
Historically, par value was considered to be
real value of the company's shares of stock
earned capital
retained earnings
Which of the following is included in the rights of common stockholders?
right to vote
convertible
shares can be converted to common stock
corporations may be _____ held or _____ held
publicly, privately
Dividends
When a corporation distributes assets of the company to its investors
Canton has 60,000 shares of $10 par stock issued and outstanding. Canton declares a 2-for-1 stock split but for convenience accounts for it as a 100% stock dividend. What is the par value per share and number of shares outstanding after the stock split?
$10 par; 120,000 shares
Daffy Duct, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. The journal entry to record this transaction includes:
$10,000 credit to Common stock $100,000 debit to Cash $90,000 credit to Additional paid-in capital
Daffy Duct, Inc. issued 10,000 shares of $1 par value common stock at $5 per share. The effect of this transaction on the accounting equation includes a:
$50,000 increase in total stockholders' equity and $50,000 increase in total assets.
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 shares (total number issued)
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 Blank______ shares.
45,000
retained earnings
A company's past profits that are not paid out in dividends
When a corporation issues shares of common stock for an amount above par, which of the following entries occur?
Credit to additional paid-in capital and Credit to common stock
Stock dividend/Stock split
Distributions of stock to current shareholders of a corporation
cumulative
Dividends not declared during one year are payable when declared in subsequent periods
redeemable
Stocks can be turned in or re-purchased on demand
declaration date
The date on which a cash dividend becomes a liability to a corporation
record date
The date on which a company determines the registered owners of the stock who will receive a dividend
dividends in arrears
Unpaid dividends on cumulative preferred stock
An IPO is when
a private company goes public
Proceeds from issuing new par value common stock above par are credited to
additional paid in capital and common stock
paid-in capital
amount of money paid into a corporation by its owners
Cumulative preferred stock is entitled to receive current dividends plus dividends in _______, Correct Unavailable before any future common dividends can be paid.
arrears
The number of shares authorized is set forth in the company's:
articles of incorporation
why do corporations repurchase their stock
boost underpriced stock, distribute surplus cash without paying dividends, boost earnings per share, satisfy employee stock ownership plans
Preferred stock carries priority over common stock:
both for dividends and at dissolution
invested capital
common stock
Proceeds from issuing new par value common stock above par are credited to
common stock and additional paid in capital
Canton, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. Mr. Smart, the bookkeeper, recorded this transaction with a $100,000 debit to Cash and a $100,000 credit to Common stock. As a result of this entry,
common stock will be overstated and additional paid-in capital will be understated.
True or false: A corporation is owned by debt and equity holders.
false
No-par value stock is common stock that:
has not been assigned a par value
Preferred stockholders:
have the right to receive dividends only in the years the board of directors declares dividends.
IPO stands for
initial public offering
Disadvantages of the corporate form of business are
more paper work and additional taxation
are dividends payed on treasury shares?
no
Common stock that has not been assigned a par value is referred to as:
no-par stock
authorized shares
number of shares a company may sell
The legal capital per share of stock that is assigned when the corporation is first established is referred to as
par value
what decreases the par value of shares
stock split
treasury stock
stock that is repurchased by the issuing corporation.
cash dividends reduce_____
stockholders equity
Ima Rich purchased 100 shares of Stockits, Inc.'s $1 par value common stock for $5 per share. Which statement is true regarding the effect of this transaction on Stockits' financial statements?
stockholders equity on the balance sheet increases
declaration date
the date on which the board of directors announces the next dividend to be payed
Daffy Duct, Inc. issued 10,000 shares of no-par value common stock at $10 per share. Miss Hap, the bookkeeper, recorded the transaction with a $100,000 debit to Cash and $100,000 credit to Common stock. Which of the following is true?
the statement is correct
Daffy Duct, Inc. issued 10,000 shares of no-par value common stock at $10 per share. Miss Hap, the bookkeeper, recorded the transaction with a $100,000 debit to Cash and $100,000 credit to Common stock. Which of the following is true?
this entry is correct
Attracting outside investment is easier for corporations than for sole proprietorships and partnerships because:
transfer of ownership interest does not change the organization's operations and ownership interest can easily be transferred among individual investors
What types of companies frequently do not pay dividends?
unprofitable and growth companies
rights of common stockholders:
vote for corporate directors, rights to dividends when declared, distribution of assets in liquidation
stock dividend
when corporations distribute additional shares of their own stock to shareholders rather than cash