ACCT Ch 11 Review

When declaring a cash dividend, its recorded as a

- debit to dividends and a credit to dividends payable

The difference between stock dividends and stock splits is that

- dividends decrease retained earnings and current assets.

Which of the following are found on a statement of stockholders equity?

Dividends, net income, additional paid in capital, stock issuances, and treasury stock

What will increase the return on equity

Repurchase of company's stock

A Stock dividend increases common stock, decreases retained earnings and has no effect on

TOTAL stockholders equity

Both stock dividends and stock splits increase

The # of shares outstanding and decrease market price

Stock Splits and Stock Dividends cause

Total stockholders equity to remain the same

When does total stockholders equity decrease?

When a cash dividend is declared

Mr. Big invested $10,000 in his new sole proprietorship company. The entry to record this investment in the accounting records includes a

a $10,000 debit to cash and $10,000 credit it to Mr. Big capital

The closing entry requires a

a debit to retained earnings and credit to dividends

Repurchasing of common stock causes

a decrease is assets and stockholders equity

If you invest $5,000 of personal income into a sole proprietorship, the effect of this transaction increases

both assets and owners equity

An advantage of equity over debt financing is

corporations are not required to pay dividends or repay stockholders

The withdrawal account is a sole proprietorship account that has a normal balance of a

debit

The journal entry to record the issuing of treasury stock at a price below the cost of the treasury stock includes a

debit to cash and additional paid in capital and a credit to treasury stock.

The journal entry to record the issuance of 100,000 shares of $0.10 par value common stock for $10 per share is a

debit to cash for $1,000,000 and credit to common stock for $10,000 and Additional paid in Capital for $990,000.

The journal entry to record the owners withdrawal of cash from a sole proprietorship for personal use includes a

debit to drawings and a credit to cash.

Stock Splits

divide each existing share into multiple shares, thus creating more shares. No change in wealth

A major advantage of the corporate form of ownership is

limited legal liability

Dividends payable is a liability account with a

normal credit balance and is initially recorded on the declaration date.

Preferred stock is useful for raising capital without

reducing common stockholders control and has no preference as to dividends

Dividends is closed in

retained earnings at the end of the fiscal year

A higher ROE means

stockholder get higher returns and the company used financial leverage to its stockholders' advantage

When a company sells shares of common stock the effects on the financial statements includes

stockholders equity on bs to increase and the financing section of statement of cash flows increases.