Chapter 11

Keys, Inc. purchased 100 shares of its own common stock for $10 per share. The stock is now classified as ______ stock, a contra equity account, reported on the statement of stockholder's equity.

treasury

When a corporation purchases shares of its own stock, it is called ________ stock.

treasury

Long, Inc. purchased 50 shares of its own $10 par value common stock for $50 per share. The journal entry to record this transaction would include a debit to the Stock account in the amount of $.

treasury, 2500

Stockholders have the right to at stockholders' meetings.

vote

Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $15,000 dividend, the payments to preferred shareholders will total _________.

$2,500

Blink, Inc. has 1,000 shares of $10 par, 5% preferred stock, and 20,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $20,000 dividend, the payment to common shareholders will total $.

19500

_________ stock is the number of shares that a corporation's charter allows it to sell.

Authorized

stock is the number of shares that a corporation's charter allows it to sell. The number of these shares usually exceeds the number of shares issued (and outstanding), often by a large amount.

Authorized

John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts? (Check all that apply.)

Common Stock Paid-in Capital in Excess of Par Value

Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.)

Credit to Common Stock, $1 par for $200. Debit to Cash for $200.

Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share. Vanya sells 50 shares of stock at its initial offering for $10 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.)

Credit to Paid-In Capital, in Excess of Stated Value for $450. Credit to Common Stock for $50. Debit to Cash for $500.

Ivers, Inc. purchased 100 shares of its own $10 par value common stock for $20 per share. The journal entry to record this transaction would include which of the following entries?

Debit to Treasury Stock; credit to Cash.

Identify the disadvantages of the corporate form of business. (Check all that apply.)

Government regulation Corporate taxation

Identify the advantages of the corporate form of business. (Check all that apply.)

Limited liability of stockholders Ease of capital accumulation Continuous life

Identify which of the following is not generally a right of common stockholders.

Manage operations

Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200 shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to record this transaction in the books of Damian, Inc., will include a credit to _________ in the amount of _______.

Paid-in Capital, in Excess of Par; $8,000

_________ has/have special rights that give it priority over other types of stock in one or more areas.

Preferred stock

Which of the following is not a reason that a corporation would issue preferred stock?

To obtain a tax advantage over corporations with no preferred stock

Corporations purchase and hold their own stock, known as treasury stock, for several reasons. Identify which of the following is not a reason that a corporation would buy treasury stock.

To reduce the market value of the common shares outstanding

True or false: Preferred stock can be issued to raise money without giving up control.

True

True or false: Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.

True

A _________ is the distribution of cash to its owners. This is determined by the board of directors.

cash dividend

A ___________ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held.

corporation

Niren, Inc.'s charter authorizes 1,000,000 shares of stock at a par value of $1 per share. Niren sells 100 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, $1 par for $.

credit, $100

Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, for $.

credit, $500

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) to the preferred stock account in the amount of $.

credit, 100

Avery, Inc. held 100 shares of its own $10 par value common stock purchased for $15 per share. On December 1, Avery sold 10 shares at $15 per share. The journal entry to record the sale of treasury stock would include a (debit/credit) to Treasury Stock in the amount of $.

credit, 150

Cameron, Inc. held 1,000 shares of its own $10 par value common stock purchased for $20 per share. In March, Cameron sold 10 shares at $20 per share. The journal entry to record the sale of treasury stock would include a (debit/credit) ________ to Treasury Stock in the amount of ________.

credit, 200

Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, $.

credit, 500

On May 25, Tyler, Inc. issues 100 shares of $10 par value preferred stock for $5,000 cash. The entry to record this transaction would include a (debit/credit) ________ to the preferred stock account in the amount of _______.

credit; $1,000

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) _______ to Common Stock for ______.

credit; $500

Dane, Inc. purchased 10 shares of its own $5 par value common stock for $20 per share. The journal entry to record this transaction would include a (debit/credit) to the Treasury Stock account in the amount of $.

debit, 200

The board of directors authorizes a cash or distribution of cash to its investors.

dividend

Stock that typically includes preference for receiving dividends and for distribution of corporate assets during a liquidation is called _ stock.

preferred

Corporations can be separated into two types. A held corporation does not offer its stock for public sale and usually has few stockholders. A held corporation offers its stock for public sale and can have thousands of stockholders.

private, public

A charter application usually must be signed by the prospective stockholders called incorporaters or . Then, it is filed with the appropriate state official.

promoters

A stock __________ is the distribution of additional shares to stockholders according to their percent ownership. When this occurs, the corporation "calls in" its outstanding shares and issues more than one new share in exchange for each old share.

split

Mario, Inc. declares a 2-for-1 stock . This means that Mario will "call in" its outstanding shares and issue two shares in exchange for each old share of stock.

split

A _______ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.

stock

The board of directors of Visor, Inc. authorize a _________, a distribution of additional shares of the corporation's own stock, to existing shareholders.

stock dividend

Two of the biggest disadvantages of the corporate form of business are government regulation and corporate .

taxation

A corporation is created by obtaining a charter from:

the state government