accounting ch. 11 – Flashcards
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Return on equity is measured in terms of...
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a percentage
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which of the following is not descriptive of common stock?
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-stockholders are considered owners, not creditors, of a corporation -the payment of dividends is never required -DIVIDENDS PAID ARE AN EXPENSE FOR THE ISSUING CORPORATION -issuing stock is less risky than issuing bonds
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What is the correct entry to record the declaration of a dividend?
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Dr. Dividends Cr. dividends payable
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which of the following phrases is NOT descriptive of the corporate form of business?
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-professional management -continuous existence -double taxation -UNLIMITED LIABILITY
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when shares of preferred stock may be redeemed by the corporations at a certain price, the shares are said to be...
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callable
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if bonds are issued at a premium, the FACE RATE is
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higher than the market rate of interest
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all of the following are advantages of issuing bonds rather than stock EXCEPT
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-financial leverage -PAYMENT OF THE BOND INTEREST IS NOT REQUIRED -bond interest is tax deductible -bondholders do not have voting rights
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true or false, no entry is required on the date of record for a cash dividend
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true
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true or false, the par value of a bond is equal to its market value
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False
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true or false, dividends in arrears are disclosed as liabilities of a corporation
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false
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true or false, convertible preferred stock is preferred stock that may be redeemed or retired at the option of the stockholder
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true
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Return on equity equation
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return on equity = net income/average stockholders equity
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True or false, stockholders' liability extends to their personal assets
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false
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True or false, the costs of organizing a corporation are normally recorded as an asset and amortized over the early years of a corporation's life
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false, it is expensed in the first year
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true or false, a corporation would be bound by a contract entered into by one it its stockholders
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false
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true or false, the board of directors is directly responsible for appointing the corporate officers
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true
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true or false, no journal entry is required on the date of declaration of a cash dividend
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false, on the RECORD date there is no journal entry required
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True or false, corporate income is subject to taxation both when earned and when distributed as dividends
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true
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dividends in arrears should be disclosed...
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in the body of the financial statements or as a footnote. (not a liability yet)
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what is true about stock option plans?
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compensation expense may be recorded only if the exercise price is less than the fair value of the options on the grant date.
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where is treasury stock disclosed in the financial statements?
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within stockholders' equity, as a deduction
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what is par value?
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the legal capital established for a share of stock
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preferred stockholder's are not likely to...
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have a right to vote at stockholders' meetings
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the contributed capital portion of stockholders' equity does NOT include...
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retained earnings
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the contributed capital portion of stockholders' equity DOES include...
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preferred stock, common stock, additional paid-in capital, paid in capital, treasury stock.
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if a company buys its treasury stock and then sells it the entry would be...
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Cr. Paid-in capital, Treasury Stock
