Chapter 10

The right to maintain​ one's proportionate ownership in the corporation is the right of

preemption

is a hybrid form of capital stock resembling both equity and debt that pays a fixed dividend

preferred stock

Paid the cash dividends

Asset: (13500) Liability: (13500) Cash Flows: (13500)

Purchased 2,500 shares of the company's own common stock at $26 per share.

Asset: (65000) Stockholders Equity: (65000) Cash Flows: (65000)

Sold 2,000 shares of treasury common stock for $29 per share.

Asset: 58000 Stockholder Equity: 58000 Cash Flows: 58000

Issued 21,000 shares of common stock ($1.00 par) for cash of $672,000.

Asset: 672000 Stockholder Equity: 672000 Cash Flows: 672000

Which class of stockholders reaps greater benefits from a highly profitable​ corporation?

Common stockholders benefit more from a successful corporatoin. The preferred stockholders dividends are limited tp a specified amount. The common stockholders take more risk as the potential for gains through an increase in value of the company's stock is unlimited

Corporation advantages

Continuous life and transferability of ownership Limited liability of the stockholders

Declared a cash dividend on the 15,000 shares of $0.90 no-par preferred stock

Liability: 13500 Stockholder Equity: (13500) Cash Flow: 0

The authorization from the state to issue a certain number of shares of stock is granted through the​ corporation's

charter

is the basic form of capital stock.

common stock

The business entity formed under state law that has a separate legal identity from its owners is a

corporaton

A stock split

has no effect on total stockholders equity

The total of the par value of all of the shares issued is the​ corporation's

legal capital

is the legal concept that means stockholders can lose no more than the cost of their investment in the company.

limited liability

Which of the following is a characteristic of a​ corporation?

limited liability of stockholders

The right to receive a proportionate share of any assets remaining after the corporation goes out of​ business, sells its​ assets, and pays off its liabilities is the right of

liquidation

The arbitrary amount assigned to each share of stock when it is originally authorized is its

par value

Who are the real owners of a corporation

Common stockholders

Journalise issued 2,800 shares of $1.00 par common stock for cash of $12.00 per share.

Debit Cash- 33600 Credit Common stock -2800 Credit Paid in capital in excess of par (common)- 30800

Journalize declaration for the cash dividends

Debit Retained earnings Credit dividends payable

Issuance of 12 million shares of common stock for $ 14.50 per share.

Debit cash- 174 Credit common stock- 48 credit paid in capital in excess pf par (common)- 126

Declared and distributed a 8% stock dividend on the 98,000 shares of $1.00 par common stock outstanding. The market value of the common stock was $28 per share.

0

Corporation disadvantages

Double taxation of distributed profits Government regulation

​Best Player, ​Inc. issued 260,000 shares of​ no-par common stock for $ 3 per share. The journal entry to record the issuance would​ be:

Debit cash- 780000 credit common stock- 780000

Journalize the payment of cash dividends

Debit dividvends payable Credit Cash

Journalize received inventory with a market value of $14,000 and equipment with market value of $42,000 for 3,200 shares of the $1.00 par common stock.

Debit inventory- 1400 Debit equipment- 42000 Credit common stock- 32-- Credit paid in capital in excess of par (common)- 52800

Coffee Cup Corporation paid $ 21 per share to purchase 1,000 shares of its common stock as treasury stock. The stock was originally issued at $ 14 per share. Which of the following would be the journal entry that Coffee Cup would make to record the purchase of the treasury​ stock?

Debit treasury stock- 21000 Credit cash- 21000

Describe the authority structure of a corporation. Who holds ultimate​ power?

The authority structure of a corporation begins with​ shareholders, who hold ultimate power. Shareholders elect the board of directors who in turn appoint officers. The board elects a chairperson​ (CEO), who is usually the most powerful person in the organization. The board designates the president​ (COO) and various vice presidents.

Saltwell Industries received ​$11,500,000 for the issuance of its stock on May 14. The par value of the Saltwell stock was only ​$11,500. Was the excess amount of ​$11,488,500 a profit to Saltwell​? If​ not, what was​ it? Suppose the par value of the Saltwell stock had been ​$2 per​ share, ​$4 per​ share, or ​$7 per share. Would a change in the par value of the​ company's stock affect Saltwell​'s total​ paid-in capital

The ecess is not a profit and therefore has no effect on net income The $11488500 is paid in capital The par value of the stock has no effect on total paid in capital Total paid in capital is the amount that stockholders have invested into a corporation The total paid in capital includes par value plus any additional paid in capital

is elected by stockholders.

board of directors

Sold 1 million of the treasury shares purchased in part c for $ 12 million

debit cash- 12 credit treasury stock- 11 credit paid in capital from treasury stock- 1

Declaration and payment of cash dividends of $ 35 million.

debit dividends payable- 35 credit cash- 35

Declaration and payment of cash dividends of $ 35 million

debit retained earnings- 35 credit dividends payable- 35

Purchase of 6 million shares of treasury stock for $ 66 million.

debit treasury stock- 66 credit cash- 66

What privileges do preferred stockholders have over common​ stockholders?

preferred stockholders have priority in receipt of assests in the corporation liquidates Perferred stockholders have priotity in receipt of dividends

represents the amount of​ stockholders' equity that the corporation has earned through profitable operations less any dividends declared.

retained earnings

The​ stockholders' ownership interest in the assets of the corporation is called

stockholders equity