Accounting - Chapter 11

To obtain a corporate charter, the organizers of the org. submit an application called the ____; specify the number of shares that a corporation is authorized to issue by the state of incorporation

articles of incorporation

A historical concept, representing the amounts invested by stockholders plus the amounts earned and retained by the corp

book value

The amount of net assets represented by each share of stock

book value per share

How is each stockholder's ownership interest determined?

by how many shares they own

Distributions of cash to stockholders (including the payment of cash dividends) represent ______ _____ which are also classified as financing activities

cash outlays

Book value is only computed for which type of stock?

common

The basic type of capital stock issued by every corporation; possess the traditional rights of ownership (voting rights, participation in dividends, and residual claim to assets in the event of liquidation)

common stock

Are top level managers appointed by the BOD

corporate officers (CEO, CFO)

A form of a business organization that is recognized under the law as a separate legal entity, with rights and responsibilities apart from those of its owners

corporation

If any/all part of the regular dividend on preferred stock is omitted in a given year, it must be paid in a subsequent year before any dividend can be paid on the common stock

cumulative preferred stock

Treasury stock account is _____ for the cost of the shares purchased, not their par value

debited

A cash payment to shareholders which represent a distribution of accumulated earnings; generally cannot exceed the amount of a corp's retained earings

dividends

In a statement of cash flows, transactions with the stockholders of a corp are classified as

financing activities

The issuance of capital stock for cash represents a receipt from

financing activities

The amount below which stockholders' equity cannot be reduced, except by losses from business operations (or by special legal action)

legal capital

The term for the concept that stockholders are not personally liable for the debts of a corporation

limited personal liability

What two reasons do businesses incorporate?

limited shareholder liability transferability of ownership

The price at which these shares change hands btwn investors represents the ____ ____ of the stock

market value

From an INVESTORS pov, shares owned in a publicly owned company are an asset, usually called

marketable securities

The balances in paid-in capital accounts remain unchanged unless what 2 things happen?

more shares are issued outstanding shares are permanently retired

When the entire issue price is credited to the Capital Stock account and is view as legal capital not subject to withdrawal

no-par

Shares that have been issued and are in the hands of stockholders

outstanding shares

Represents an amount invested in the company by its owners at the time the company sells the stock; this amount represents capital available to the company from the original sale of the stock

outstanding stock

The company issuing stock records the issue price in its

paid-in capital accounts

May be regarded as a minimum cushion of equity capital existing for the protection of creditors

par value

Represents the legal capital per share

par value (stated value)

When the rights of stockholders are modified this term is often used to describe the resulting type of capital stock

preferred stock

The state in which the corporation is called

state of incorporation

increasing the number of its common shares outstanding, reduces the market price of each share of stock, and does not reduce the amount of equity financing of the company

stock split

Generally occur when a company's stock price has become too expensive for many investors

stock splits

The owners of a corporation are called

stockholders

What happens when stock is sold for more than par value?

the Capital Stock account is credited with the par value of the shares issues and a separate account, Additional Paid-in Capital, is credited for the excess of selling price over par

A main feature of a corporation is ownership is represented by shares of capital stock that can be bought and sold

transferability of ownership

Shares of a corporation's own capital stock that have been issued and later reacquired by the issuing company but have not been cancelled or permanently retired

treasury stock

True or false: A corporation is obligated to pay dividends to stockholders only when cash is available and the BOD declares a dividend

true

This person guarantees the issuing corporation a specific price for the stock and earns a profit by selling the shares to the investing public at a slightly higher price

underwriter