Ch 11 Learnsmarts

In an IPO on May 1, 2009, Timmy Hilfigure purchased 1,000 shares of abner crummie, Inc for $5,000. On April 30,2015, Timmy sold 1,000 shares for $8000 to Ralph loring. What is the effect on the sale on April 30,2015?

Abner crummie, Inc will not be directly affected by this transaction

what is an IPO?

Initial Public Offering & when a private company goes goes public

Cumulative preferred stock is entitled to receive current dividends plus "dividends in ___?____" before any future common dividends can be paid

arrears

dividend payment date is when?

cash is decreased dividends payable is decreased

stock splits

cause the par value per share to change

stock splits and stock dividends

cause total stockholders equity to remain the same

The journal Entry to record the declaration of a dividend includes?

debit dividends credit dividends payable

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

debit dividends payable credit cash

Mega Corporation repurchased 1,000 shares of its $1 par value CS for $8,000. the Effect of this transaction on the Accounting equation include?

decrease in Assets decrease in STE

similar to stock split, a stock_______ also distribution additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders

dividend

payment date

dividends payable is decreased

preferred stock generally ____preferences as to dividends

has

common stock par value_________

introduced to prevent bankrupt companies from unfairly distributing company resources has become less meaningful b/c states use other means to prevent removing capital from distresses companies affects how common stock is recorded

A corporation may be restricted from paying a dividend if?

loan agreement is violated & dividends > than the amount of retained earnings

a dividend date of record is the date a corporation

makes no entry - cut off date to determine which stockholders get dividends

do corporations have legal obligations to pay dividends?

no

Which statements are true about cash dividends?

on payment date, current assets are decreased on declaration date, liabilities are increased

Earnings per share appears?

on the income statement

stock dividends

require a journal entry

dividends is closed into ___________at the end of the fiscal year

retained earnings

what are the line items that would be found on a statement of STE

stock issuance dividends APIC treasury net income

Date of record

stock records are finalized to determine which Stockholders get dividends

a higher ROE mean?

the company used financial leverage to its Stockholders advantage stockholders may enjoy higher returns

what is reason a company would NOT repurchase stock

to increase STE balance and improve ROE

why stock options are given

to provide incentive for employees to work harder

T/F, No gain or losses are reported when treasury stock is reissued b/c GAAP does not consider transactions between a corporation and its owners to be a profit making activities?

true

when should a corporation record a liability for dividends on its cumulative preferred stock

when the dividends have been declared

Refurbish , Inc bought 1,000 shares of its own stock for $8 per share. Later reissued the shares for $10,000. The effect on the entry to record the sale of treasury stock on the accounting equation include?

$10,000 increase to STE

declaration date

Board of directors officially approve a dividend

Canton, Inc issued 10,000 shares of $1 par value common stock at $10 per share. recorded this transaction with a $100,000 debit to cash and $100,000 credit to common stock. As a result this entry?

Common stock is overstated APIC will be understated

Dilution Solutions Inc, repurchased 500 shares of its $2 par value CS for $10,000. The Journal Entry

Debit to treasury stock $10,000 credit to cash $10,000 * when repurchase record how much it was bought for NOT par

* review Refurbish, Inc reissued 1,000 shares of its Treasury for $10,000. Prior to reissuance, Treasury was $12,000, which included the $8,000 cost of the 1,000 shares reissued. After recording this transaction_______

Treasury Stock = $4,000 APIC increased by $2,000

dividends on preferred stock...

more attractive than common stock dividends to investors that want a stable income paid before dividends on CS paid at a fixed rate, such as 7%

a corporation that has a loan covenant

must disclose the covenant in the notes to the financial statements may be required to pay loan immediately if it violates its covenant

lenders will sometimes impose dividend restrictions to?

prevent corporations from paying out too much to Stockholders