purdue mgmt 200 ch 10 review

The declaration of cash dividends reduces ______ -______

retained earnings

earned capital increases

retained earnings

earned capital invested capital

retained earnings common stock

_______ stock dividends are recorded at market value, while _______ , stock dividends are recorded at par value.

small, large

Another common term for stockholders' equity is:

stockholder's equity

Similar to a stock split, a stock _______ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders.

dividend

The amount of dividends paid out relative to the share price is referred to as:

dividend yield

Historically, par value was considered to be

the value of the company's shares of stock.

preferred stock:

1. generally does not have voting rights. 2. has preference as to dividends. 3. is useful for raising capital without reducing common stockholders' control.

Preferred stock is advantageous in that it:

1. has priority over common stock when dividends are declared. 2. has priority over common stock at liquidation.

Limited liability and ease of raising outside capital are advantages of this business form:

corporation

The effect on the accounting equation of declaring a dividend that will be paid at a later date includes a(n):

increase in liabilities. decrease in stockholders' equity.

Which of the following are included in the rights of common stockholders?

right to vote on certain matters

True or false: The board of directors is responsible for establishing corporate policies.

true

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.

Disadvantages of the corporate form of business are

additional taxation more paperwork

The declaration and payment of a cash dividend ultimately causes a(n):

decrease in stockholders' equity. decrease in Cash. decrease in Retained earnings.

The purpose of the statement of shareholders' equity is to

report the changes and the sources of the changes in shareholder equity accounts.

The advantages to the corporate form of business include

transferability of ownership ease of raising capitl

Wyanot Company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $110 cash per share. The journal entry to record this transaction includes:

$100,000 credit to Preferred stock. $10,000 credit to Additional paid-in capital - preferred. $110,000 debit to Cash.

Which of the following ratios measures the ability of company management to generate earnings from the resources owners provide?

Return on equity

which financial statement summarizes the changes in the balance of each stockholders' equity account?

Statement of stockholders' equity only

Distributions of stock to current shareholders of a corporation are called what type of distribution? (Select all that apply.)

Stock split Stock dividend

The journal entry to record the declaration of a dividend includes ______.

a credit to Dividends payable a debit to Dividends

A frequent reason for a stock split is to

cause the market price per share to decline.

Dividends payable is recorded as a credit on the

declaration date

Stock dividends have the following effects on stockholders' equity

decrease in retained earnings increase in common stock no change to total stockholders' equity

A distribution of a company's accumulated prior earnings is a(n) ______.

dividend

The most important advantage to the corporate form of business is

limited liability

A small stock dividend is valued at

market value

ROE relates ______.

net income to the average stockholders' equity

Stock splits have the following effects on stockholders' equity

no change to total stockholders' equity

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

A corporation is owned by its _______ . (Enter one word per blank)

shareholders

Which of the following will decrease the par value of shares?

stock split

The term treasury stock refers to

stock that is repurchased by the issuing corporation.

Shareholders' equity is another common term for _____ equity

stockholder's

X-Co issued 1,000 shares of its 5%, $10 par value, cumulative preferred stock for $100 cash per share. The journal entry to record this event includes:

$90,000 credit to Additional paid-in capital. $10,000 credit to Preferred stock. $100,000 debit to Cash.

Which of the following reports net income relative to average stockholders' equity in dollars?

ROE (return on equity)

Preferred stock tends to have attributes of

both bonds and common stock.

When a corporation distributes assets of the company to its investors, it is referred to as a(n)

dividend

The dividend yield is calculated by dividing:

dividends per share by the stock price per share

preferred stockholders

have the right to receive dividends only in the years the board of directors declares dividends.

In a corporation, the stockholders' potential loss is

limited to the amount of the investment.

______ capital is the amount of money paid into a company by its owners.

paid-in

The legal capital per share of stock that is assigned when the corporation is first established is referred to as ________ _________

par value

convertible redeemable cumulative

Shares can be converted for common stock Stocks can be turned in or re-purchased on demand Dividends not declared during one year are payable when declared in subsequent periods

Additional taxes and more paperwork are the two primary disadvantages of this business form:

corporation

The rights of common stockholders typically include which of the following?

1. Right to distribution of assets in liquidation. 2. Right to dividends when declared. 3. Right to vote for corporate directors.

The number of shares authorized is set forth in the company's:

articles of corporation

Preferred stock has a mixture of attributes of both equity and ______

debt

The amount of money paid into a company by its owners is referred to as:

invested captial

A 2-for-1 stock split increases the marketability of the stock because

market price per share decreases

small stock dividend large stock dividend

recognized at market value recognized at par value

Special contractually granted features can make preferred stock:

cumulative redeemable convertible

Shares of stock previously sold by the corporation that are repurchased are called

treasury stock

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

Morgan Company issued cumulative preferred stock. What additional special feature(s) could also have been granted to preferred stock holders?

1. The right to redeem the preferred shares for cash 2. The right to convert the shares to common shares

Which of the following are included in the duties of the board of directors?

Appoint officers to manage the corporation. Establish corporate policies.

Convertible Redeemable Cumulative

Marcus turn in his preferred stock and receives common shares in exchange. Nurbert Inc. demands return of preferred stock at the pre-specified amount During the current year, Petra Inc. pays dividends that were not declared last year

positive ____ represent the key to a company's long run survival

earnings

Evaluation of the company's profitability requires consideration of the amount of a company's earnings in relation to the size of the

investment.

A corporation's accumulated, undistributed net income or loss is referred as

retained earning

Diva, Inc. declared and paid $10,000 of dividends in 2018. The dividends result in a reduction of

retained earnings

Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights:

1. first right to specified amount of dividends 2. preference in distribution of assets during dissolution of corporation

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

Return on_______ , measures the ability of company management to generate earnings from the resources provided by owners.

equity

True or false: A corporation is owned by debt and equity holders.

false

A corporate charter:

1. specifies the shares of stock to be issued. 2. names the board of directors. 3.describes the business activities.

Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares.

45,000 Rationale: The 45,000 shares outstanding equals the number issued of 50,000 minus the 5,000 shares bought back by the company.

When a business incorporates, it must file its ______ with the state in which it incorporates.

articles of incorporation

The total number of shares that a company may sell is referred to as _____ shares

authorized

Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders' equity section of the balance sheet?

preferred stock

The number of shares issued represents the number of shares:

sold