Acct 2301- Accounting Ch 10
A business that incorporates must file a document in the state, which includes a description of the business activities, the shares to be issued and the composition of the board of directors. Which of the following terms are used to describe this document?
- Articles of incorporation - Corporate charter
Disadvantages of the corporate form of business are:
- Additional taxation - More paperwork
A corporate charter:
- Describes the business activities. - Names the board of directors. - Specifies the shares of stock to be issued
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 ____ shares
100,000
Which of the following transactions are classified as a stock dividend?
A distribution of additional shares of a corporation's stock to current shareholders of the corporation.
Which of the following occurs on the date of record
A list of shareholders that are entitled to receive a dividend is made.
A ____ balance in retained earnings indicates an accumulated deficit
Debit
Select those statements below that are true about cash dividends
On the declaration date, liabilities are increased. On the payment date, current assets are decreased.
A distribution of a company's accumulated prior earnings is a(n)____
dividend
When does a corporation record an increase in dividends payable?
on the declaration date
A business that is co-owned by two or more persons, and whose investors have unlimited liability, is called a
partnership
The date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the
record date
Corporations will declare a stock split in order to ____
reduce the market price of a share of stock and make it more attractive to some investors
The purpose of the statement of shareholders' equity is to
report the changes and the sources of the changes in shareholder equity accounts
A company's past profits that are not paid out in dividends are ____.
retained earnings
Which of the following will decrease the par value of shares?
stock split
Which of the following is included in the rights of common stockholders?
the right to vote
Identify what is needed to calculate the PE ration
- Earnings per share - stock price
The advantages to the corporate form of business include
- Ease of raising capital - Transferability of ownership
Which of the following are sources of shareholders' equity?
- Paid-in capital - Retained earnings
The rights of common stockholders typically include which of the following?
- Right to distribution of assets in liquidation. - Right to dividends when declared. - Right to vote for corporate directors.
Distribution of stock to current shareholders of a corporation are called what type of distribution?
- Stock dividend - Stock split
Retained earnings are
- all of the company's earnings not distributed to stockholders - decreased by dividends - increased by net income - sometimes called earned capital
Shareholder's equity consists of which of the following items?
- amounts earned by the corporation - amounts invested by shareholders
True or false: A corporation is owned by debt and equity holders
False Reason: A corporation is owned by its shareholders, who are equity holders.
Which of the following reports net income relative to average stockholders' equity in dollars
ROE
Which financial statement summarizes the changes in the balance of each stockholders' equity account?
Statement of stockholders' equity only
Stock splits | Stock splits and stock dividends | Stock dividends
cause the par value per share to change | cause total stockholders' equity to remain the same | require a journal entry
Additional taxes and more paperwork are the two primary disadvantages of this business form:
corporation
Limited liability and ease of raising outside capital are advantages of this business form:
corporation
a distribution of assets to shareholders is referred to as a(n):
dividend
Additional shares issued to existing owners without an exchange of cash may be in the form of stock ___ or stock ___
dividends, splits
Investors who acquire preferred stock
do not have voting rights. have preference as to dividends.
Preferred stock generally (has/does not have) ____ voting rights and (has/does not have) ____ preference as to dividends
does not have; has
Positive ____ represents the key to a company's long run survival
earnings
Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights:
first right to specified amount of dividends preference in distribution of assets during dissolution of corporation
Preferred stockholders:
have the right to receive dividends only in the years the board of directors declares dividends.
____ capital is the amount of money paid into a company by its owners
invested
The amount of money paid into a company by its owners is referred to as:
invested capital
Evaluation of the company's profitability requires consideration of the amount of a company's earnings in relation to the size of the
investment
The number of shares outstanding equals the number of shares ____
issued minus the number of shares in treasury
The most important advantage to the corporate form of business is
limited liability
In a corporation, the stockholders' potential loss is:
limited to the amount of the investment
ROE relates
net income to the average stockholders' equity
An accumulated deficit in retained earnings indicates that the company has
net losses
A business that is organized, owned, and managed by one person and has unlimited liability is called a:
proprietorship
The term treasury stock refers to
stock that is repurchased by the issuing corporation.
A corporation is owned by its
stockholders (shareholders, investors, common stockholders)
A 2-for-1 stock split increases the marketability of the stock because
the market price per share decreases.
Shares of stock that are repurchased are referred to as ____ stock
treasury