Chapter 11 Stockholders' Equity Acctg

Daffy Duct, Inc. issued 10,000 shares of $1 per value common stock at $10 per share. The journal entry to record this transaction includes a ______________.

$90,00 debit to cash, $100,000 credit to cash, $10,000 credit to common stock

The effect of transactions on financial statements when 100 shares for par value of $1 for $5 per share

the financing activities section of the statement of cash flows increases; stockholders' equity on the balance sheet increases.

When Diva, Inc. declared a $10,000 cash dividend, it recorded a debit to _______________ and a credit to Dividends ______________.

Dividends; Payable

These statements are true about cash dividends

On the payment date, current assets are decreased; on the declaration date, liabilities are increased.

Dividends is closed into ________________ _____________________ at the end of the fiscal year.

Retained Earnings

What are the benefits of common stock?

Voting Rights, the right to receive dividends if they're declared, a preemptive right to buy newly issued stock before it is offered to others, a residual claim on assets after creditors and preferred stockholders have been satisfied.

The declaration of a dividend results in:

a decrease in retained earnings after temporary accounts are closed; an increase in liabilities; an increase in dividends

Cumulative preferred stock is entitled to receive current dividends plus "dividends in ____________" before any future common dividends can be paid.

arrears

Preferred stock carries priority over common stock _________.

both for dividends and at liquidation.

stock splits and stock dividends

cause total stockholders' equity to remain the same

stock split

causes the par value per share to change

Ownership structure can vary from one company to another, but the most basic form of corporations offer :

common stock

The owners of a(n) _____________ are not personally responsible for the debts of the business

corporation

date of record

stocks are finalized to determine which stockholders are to receive payments

Contributed capital of $1M represents:

the amount stockholders have invested in exchange for stock

declaration date

the board of directors officially approve a dividend

Dividends payable is recorded as a credit on the

declaration date

Retained Earnings are _____________.

decreased by dividends, all of the company's earnings kept rather than distributed to stockholders; sometimes called earned capital; increased by net income

payment date

dividends payable is decreased

Which of the following line item amounts are under the retained earnings column of a statement of stockholders' equity?

dividends: common; dividends: preferred; net income

A corporation ___________ have a legal obligation to pay dividends

does not

A corporation is a separate legal entity that can:

enter into contracts; sue or be sued; own assets

Advantages of equity financing over debt financing includes:

equity financing does not require repayment, dividends are optional

An increase in EPS is an indicator of ________.

higher profitability

advantages of debt financing over equity financing include:

interest payments are deductible; stockholders' control will not be diluted

Retained Earnings of $100,000 represent a corporation's cumulative earnings_____________ and is shown on the ____________.

kept; balance sheet and statement of retained earnings

Dividends Payable is a(n) _________________ account with a normal balance and is initially recorded on the _______________ date.

liability, credit, declaration

a major advantage of the corporate form of ownership is _______________ legal liability.

limited

Dividends on preferred stock:

may be paid at a fixed rate; are paid before dividends on common stock; are more attractive than common stock dividends to investors who want a stable income.

Earning per share (EPS) equals _______divided by the average shares of common stock outstanding.

net income

another term for stockholders is_____________.

owners

Investors earn a return on stock investments by:

receiving dividends; selling stock for more than its cost

Treasury Stock

reduces total stockholders' equity; is shares of stock no longer outstanding; is a contra-equity account

Stock dividends

require a journal entry

A company's past profit that are kept instead of being paid to stockholders are

retained earnings

Corporations can raise large amounts of money because

shares of stock can be purchased in small amounts, so even small investors can participate.

the number of shares issued represents the number of shares ______________.

sold

Diva Inc. declared and paid $10,000 of dividends in 2015. Dividends of $10,000 may be found on the ____________.

statement of retained earnings

What is needed to calculate the P/E ratio

stock price; Earnings Per Share

contributed captial of $1M is found in the _________________section of the _____________.

stockholders' equity; balance sheet