ch11 preclass
Cloud Company has 5,000 shares of 6%, $20 par value cumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2. If Cloud pays $30,000 of cash dividends in Year 3, preferred stockholders will receive ______.
$18,000
Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. This was reported as ______ activities.
$24,000 of cash inflow from financing
Thomas Company has $120,000 of assets, $40,000 of liabilities, $50,000 of stock, and $30,000 of retained earnings. Investors own 25,000 shares of Thomas' stock with a current market value of $5.20 per share. Based on this information, the book value per share is ______.
$3.20 ($50,000 stock + $30,000 ret. earn.) / 25,000 shares
Cloud Company has 5,000 shares of 6%, $20 par value noncumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2.If Cloud pays $30,000 of cash dividends in Year 3, preferred stockholders will receive ______.
$6,000
Base Line Incorporated is authorized to issue 50,000 shares of $15 par value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. Immediately after the issue, Base Line's balance sheet reported ______ of paid-in capital in excess of par value.
$90,000 $24 issue price - $15 par value = $9 in excess of par x 10,000 shares = 90,000
Match the account title shown in the right column with the order in which they are presented in the stockholders' equity section of a balance sheet. Use the number 1 to represent the account title shown first, the number 2 to represent the second title, and so on.
1 - Par value preferred stock 2 - Stated value common stock 3 - Class B common stock 4 - Paidin capital in excess of par value preferred stock 5 - Paidin capital in excess of stated value common stock 6 - retained earnings
True or false: The PCAOB Act of 2002 was adopted to address a number of high-profile business failures.
False
True or false: The stated value of a share of stock is established by the federal government.
False
The issue of no-par common stock affects the ______.
Statement of Cash Flows Balance Sheet
True or false: Partnerships and proprietorships are usually managed by their owners.
True
Stanley Company paid $25 per share to purchase 200 shares of its $10 par value common stock.When Stanley resells 100 shares of the treasury stock for $30 per share ______.
a $500 increase in additional paid-in capital from treasury stock will be recorded assets will increase by $3,000
The departure of owner(s) does not terminate _____.
a corporation
Cumulative dividends ______
accumulate for future payment when unpaid may also be called dividends in arrears
Purchasing treasury stock is a(n) ______ transaction.
asset use
The maximum number of shares of stock corporations are legally permitted to issue is called ______ shares.
authorized
Book value per share is ______.
calculated by dividing total stockholders' equity by the number of shares of stock owned by investors measured in historical dollars
The PCAOB ______.
can impose sanctions for violations of its rules, laws, and standards was created by the Sarbanes-Oxley Act of 2002
The sale of treasury stock is a(n) ______.
capital acquisition
The greatest potential for rewards when a corporation prospers rests with ______ stockholders.
common
The benefit of limited liability is a significant reason for the popularity of the ______ form of business structure.
corporate
It is easiest to transfer ownership in a ______.
corporation
Continuity of existence is an advantage of ______.
corporations
Stock certificates are used as evidence of ownership in ______.
corporations
The ability to generate billions of dollars of capital by pooling the resources of millions of owners through public stock and bond offerings is only available to ______.
corporations
The greatest opportunity to raise capital is available to ______.
corporations
The journal entry to record the purchase of treasury stock includes a ______.
credit to cash debit to treasury stock
The journal entry to record the issue of $10 par value stock for $25 cash includes a ______ account.
credit to the common stock debit to the cash credit to the paid in capital excess of par value
The journal entry to record the issue of no par stock for $25 cash includes a ______ account.
debit to the cash credit to the common stock
The journal entry to record the issue of $10 par value stock for $25 cash includes a ____ to cash, a ____ to common stock, and a ____ to additional paid in capital in excess of par value account.
debit, credit, credit
The journal entry to record the issue of $10 stated value stock for $25 cash will include a ____ to cash, a ____ to common stock, and a ____ to additional paid in capital in excess of stated value account.
debit, credit, credit
When a company issues no-par common stock, the ______.
entire proceeds are recorded in the Common Stock account cash inflow is classified as a financing activity
Double taxation refers to the fact that ______.
income is taxed at both the corporate level and when stockholders receive dividends
Common reasons corporations purchase treasury stock include to ______.
keep the price of the stock high when it appears to be falling avoid a hostile takeover have stock available to satisfy the requirements of employee stock option plans
A chief advantage of the corporate form of business is ______.
limited liability
Book value per share is ______.
measured in historical dollars calculated by dividing total stockholders' equity by the number of shares of stock owned by investors
Transferring the ownership of a proprietorship is difficult because ______.
most proprietorships are owner operated a buyer must purchase the entire business
Par value ______.
multiplied by the number of shares of stock issued represents legal capital represents the maximum liability of the investors
Corporation are ______ required to declare dividends.
not
Preferred stock ______.
often has a liquidation value frequently has a dividend guarantee dividends are paid before common stock dividends
When a corporation buys treasury stock, the number of shares of stock ______.
outstanding decreases authorized is not affected
In the stockholders' equity section of the balance sheet, ____ stock is normally listed before ____ stock.
preferred, common
Owner contributions and retained earnings are combined in a single capital account on the balance sheets of ______.
proprietorships
The term withdrawal may appear in the financial statements of ______.
proprietorships partnerships
The party that owns the stock on the date of ______ is legally entitled to a cash dividend.
record
Common stockholders have the right to ______.
share in the distribution of profits participate in the election of directors vote on significant matters that affect the corporate charter
An organization owned by a single individual who is responsible for making business and profit distribution decisions is called a(n)
sole proprietorship
An arbitrary amount established by the board of directors of a corporation assigned to no-par stock is called
stated value
The highest level of organizational authority in a corporation is represented by ______,
stockholders
Base Line Incorporated is authorized to issue 50,000 shares of $15 stated value common stock. On January 1, Year 1, Base Line issued 10,000 shares of the stock for $24 per share. As a result of the stock issue ______.
the income statement was not affected total assets increased by $240,000 cash flow from financing activities increased by $240,000
authorized stock
the maximum number of shares a company can legally issue
outstanding stock
the number of shares currently owned by investors
treasury stock
the number of shares of stock that a company has repurchased from its investors
issued stock
the total number of shares the company has sold to investors
When a corporation purchases its own stock, the stock purchased is called ______ stock.
treasury
Distributions to owners of proprietorships are called
withdrawals
