Chapter 10 learn smart - Flashcards

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retained earnings represents _______ by the business

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cumulative net income kept cumulative profits retained

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preferred stock carries priority over common stock

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both for dividends and at liquidation

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similar to a stock split, a stock _____ also distributes addition shares of stock to existing stockholders on a pro rate basis at no cost to the stockholders

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dividends

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which of the following are sources of shareholders equity

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paid in capital retained earnings

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declaration date

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the board of directors officially approves a dividend

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date of record

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stock records are finalized to determine which stockholders are to receive payment

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payment date

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dividends payable is decreased

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daffy duct inc. issued 10,000 shares of $1 par value common stock at $10 per share. The journal entry to record this transaction includes a _____.

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90,000 credit to additional paid in capital 100,000 debit to cash 10,000 credit to common stock

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when common stock has a designated par value, and common stock is issued at an amount above par, which entry is recorded

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credit common stock for the par amount

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a distribution of assets to shareholders is referred to as

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dividend

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the number of shares outstanding equals the number of shares

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issued minus the number of shares in treasury

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a corporation is owned by its _____

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stockholders

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the date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the

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record date

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morgan company issued cumulative preferred stock. What additional special features also have been granted to preferred stock holders

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the right to redeem the preferred shares for cash the right to convert the shares to common shares

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which of the following accurately describes shareholders equity

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ownership interests of the shareholders

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dividends declared is closed into _________ at the end of the fiscal year

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retained earnings

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distributions of stock to current shareholders of a corporation are called what type of distribution

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stock dividend stock split

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equity

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represents an ownership interest in the company

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debt

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represents a creditors interest that must be repaid

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the journal entry to record the declaration of a dividend includes _____

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a debit to dividends a credit to dividends payable

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authorizes shares

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total number of shares available to sell as indicated in the company's articles of incorporation

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issued shares

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total number of shares of stock issued or sold to investors

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outstanding shares

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the number of shares issued less treasury shares repurchased by the corporation

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which account is a stockholder's equity account

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additional paid-in capital

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shares of stock that are repurchased are referred to as ___ stock

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treasury

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the declaration of a dividend results in _____

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an increase in liabilities a decrease in retained earnings after temporary accounts are closed an increase in dividends declared

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

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the market price per share decreases

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earned capital

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retained earnings

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invested capital

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common stock

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in a corporation, shareholder's liability is

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limited to the amount of the investment

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the two types of corporations are

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public and private

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a frequent reason for a stock split is to

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cause the market price per share to decline

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assets _____ liabilities is equal to shareholders equity

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minus

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special contractually granted features can make preferred stock

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cumulative redeemable convertible

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which of the following occurs on the date of record

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a list of shareholders that are entitled to receive a dividend is made

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the ownership interests of the investors in a corporation are referred to as

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shareholder's equity

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unpaid dividends on cumulative preferred stock are referred to as dividends in

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arrears

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the contra account use to record a company's repurchase of its own common stock is the ____ stock account

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treasury

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investors who acquire preferred stock

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do not have voting rights have preference as to dividends that is cumulative have the right to receive dividends in arrears once dividends are declared

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a _____ stock dividend is valued at the fair value at the date of declaration

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small

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x-co issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $100 cash per share. The journal entry to record this events include

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100,000 debit to cash 100,000 credit to preferred stock

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identify what is needed to calculate the PE ratio

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stock price earnings per share

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a corporation accumulated income that has not been distributed as dividends to shareholders is referred to as _____ earnings

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retained

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preferred stock is advantageous in that it

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has priority over common stock at liquidation has priority over common stock when dividends are declared

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stockit, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. Stockit has repurchased 10,000 of its own shares. The number of shares. The number of shares authorized equals _____ shares

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1,000,000

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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

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100,000 credit to preferred stock 10,000 credit to additional paid in capital - preferred 110,000 debit to cash

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Just in Thyme, Inc. has the following end of the year equity balances: common stock of 20,000: additional paid in capital of 30,000: and retained earnings of 50,000. If just in thyme repurchases 10,000 of its stock, the total stockholders equity balance would equal ___

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90,000

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stock splits

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cause the par value per share to change

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stock splits and stock dividends

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cause total stockholder's equity to remain the same

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stock dividends

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require a journal entry

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during the year, Squid roe inc revenues were 200,000 and its net income was 60,000. It's stockholder's equity and total assets were 380,000 and 780,000 at the beginning of the ear

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15%

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Dilution solutions inc repurchases 500 shares of its 2 par value common stock for 10,000. The effect of this transaction on the accounting equation, using the cost method includes

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10,000 increase in treasury stock 10,000 decrease in cash

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ima rich purchased 100 shares of stock its inc $1 par value common stock for $5 per share. Which statements are true regarding the effect of this transaction on stock its financial statements

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stockholders equity on the balance sheet increases the financing activities section of the statement of cash flows increases

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stocks that are priced low in relation to current earnings are commonly referred to as ____ stocks

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value

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the statement of shareholder's equity reports

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the changes in each shareholder equity account

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issuing 1,000 shares of 5% par value, cumulative preferred stock for $100 cash per share affects the accounting equation by

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increasing total assets increasing total stockholders equity

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a business that is organized, owned, and managed by one person and has unlimited liability is called a

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propietorship

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farley corp, has 50,000 shares of $1 par value common stock issued and outstanding. Farley declares a 10% stock dividend when the fair value of the stock is $9 per share. Which of the following entries will be included in the entries required to record the declaration and payment of the stock dividend

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debit retained earnings 45,000 credit additional paid in capital 40,000 credit common stock 5,000

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cumulative preferred stock is entitled to receive current dividends plus dividends in ____ before any future common dividends can be paid

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arrears

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stock splits have the following effects on stockholders equity

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no change to total stockholders equity

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balance sheet

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shows the balance of each equity account at a specific point of time

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statement of stockholders equity

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shows the change in the account balance of each equity account over time

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earnings per share (EPS) appears

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on the income statement

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a business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document

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corporate charter and

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the dividend payment date is when

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dividends payable is decreased cash is decreased

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daffy duct. inc issued 10,000 shares of $1 par value common stock at $5 per share. The effect of this transaction on the accounting equation includes a

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50,000 increase in total assets 50,000 increase in total stockholders equity

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gosling corp. has 100,000 shares of common stock authorized, 80,000 shares issued, and 20,000 shares of treasury stock. Gosling declares a dividend of .10 share. Which of the following entries is required at the date of declaration

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debit dividends 6,000

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the right of a shareholder to exchange his preferred stock for another class of stock is referred to as a _______ right, whereas the right of the preferred shareholder to have her stock repurchased by the corporation for cash is referred to as a ______ right

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convertible redemption

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allison company's board of directors assigns a $2 stated value to its no-par common stock. If allison sells 10,000 shares for 10 per share, the common stock account should be credited for

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20,000

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a higher ROE means

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the company used financial leverage to its stockholders advantage stockholders may enjoy higher returns

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a ____ corporation is considered closely held with few owners, whereas a ____ corporation is available to any investor who wants to purchase shares of stock on the stock exchange

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private public

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an increase in EPS is an indicator of

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higher profitability

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a business that is co-owned by two or more persons, and whose investors have unlimited liability, is called a

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partnership

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the purpose of the statement of shareholder's equity is to

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

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knorr issues 1,000 shares 2 par value common stock for 10 per share. The journal entry to record this transaction will include which of the following

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credit to additional paid-in capital 8,000 credit to common stock 2,000

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preferred stockholders usually have preference over common stockholders with respect to which item

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dividends distribution of assets in liquidation

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

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credit to treasury stock debit to additional paid in capital debit to cash

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only _____ common shares are eligible to receive dividends

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outstanding

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if a company repurchases its shares of stock, the shares are reported as

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a contra equity account - treasury stock

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green company declares and issues a 20% stock dividend. The stock dividend will cause total assets to

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remain the same

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canton has 60,000 shares of 10 par issued and outstanding. Canton declares a 2-for-1 stock split. What is the par value and number of shares outstanding after the stock split

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$5 par, 120,000 shares

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the date on which a cash dividend becomes a liability to a corporation is the

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declaration date

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which of the following are included in the duties of the board of directors

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establish corporate policies appoint officers to manage the corporation

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cumulative preferred stock is entitled to receive current dividends play dividends in _______ before any future common dividends can be paid

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arrears

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On march 1, 2018, fresh corp. declared a dividend of $3,000. The record date is march 20, 2018, and the payment date is april 1, 2018. The journal entry required on april 1, 2018 will include which of the following entries

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debit dividends payable 3,000 credit cash 3,000

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issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $110 in cash per share affects the accounting equation by

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increasing total assets increasing total stockholders equity increasing additional paid-in capital

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an accumulated deficit in retained earnings indicates that the company has

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net losses

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squid roe, inc.'s ROE increased 2 percentage points to 12%. This increase may have happened because squid roe_______

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generated more profits than the interest incurred on its borrowed funds replaced its 12% debt with 10% debt

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mega corporation repurchased 1,000 shares of its 1 par value common stock for 8,000. The effect of this transaction on the accounting equation is

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decrease in stockholders equity decrease in assets

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who controls and owns a corporation

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shareholders

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on march 1, 2018, fresh corp. declared a dividend of 3,000. The record date is March 20,2018, and the payment date is april 1, 2018. What is the journal entry required on march 20, 2018

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no entry is required

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preferred stockholders

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

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when should a corporation record a liability for dividends in arrears on its cumulative preferred stock

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when the dividends have been declared

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the risk from financial leverage

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decreases when a company issues new shares of stock increases when the cost of borrowing is greater than the return

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the journal entry to record the resale of treasury stock below cost will result in a debit to cash and

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an equity account

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the rights of common stockholders typically include which of the following

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right to dividends when declared right to vote for corporate directors right to distribution of assets in liquidation

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a ____ stock dividend is less than 25% of the outstanding shares of stock

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small

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investors earn a return on stock investments by

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receiving dividends selling the stock for more than its cost

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the dividend payment date is when

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cash is paid to satisfy the dividend liability

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when treasury stock is purchased, the cost of treasury stock is reported as

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a reduction in shareholders equity

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daffy duct, inc. issued 10,000 shares of no-par value common stock at 10 per share. Miss Hap, the book keeper, recorded the transaction with a 100,000 credit to common stock. Which of the following is true

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entry is correct

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a corporation ____ have a legal obligation to pay dividends

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does not

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corporations raise capital by

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issuing stock operating at a profit issuing debt

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a stock dividend typically causes the stock price to

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decrease

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on march 1, 2018, fresh corp. declared a dividend of 3,000. The record date is march 20, 2018, and the payment date is april 1, 2018. The journal entry required on march 1, 2018, will include which of the following

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debit dividends 3,000 credit dividends payable 3,000

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earnings per share (EPS) may be determined by

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dividing net income less preferred dividends by the average common shares outstanding dividing the stock price by the P/E ratio

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consistent with IFRS, preferred stock is typically reported as

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a liability

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stock dividend _____

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provides no economic value for current stockholders

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a wealthy individual in the business community who risks investment funds on promising new businesses is referred to as a

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angel investor

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an accumulated deficit

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means that retained earnings has a debit balance indicates accumulate net losses

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wok n roll, inc. began on Jan 1, 2014 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of $100 par value, 5% cumulative preferred stock. No dividends were declared in 2014 or 2015. In 2016, wok n roll declared and paid .50 dividend to its common stockholders. Assuming all shares originally are outstanding, the total dividend declared and paid in 2016 equals

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65,000

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earning per share (EPS) equals _____ divided by the average shares of common stock outstanding

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net income

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limited liability companies and limited liability partnerships share which of the following characteristics

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no double taxation limited personal liability unlimited number of owners

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the advantages to the corporate form of business include

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ease of raising capital transferability of ownership

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an IPO

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stands for initial public offering is when a private company goes public

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disadvantage of the corporate from of business are

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double taxation government regulation

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which of the following dividends has no effect on total owners' equity

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stock dividend

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refurbish, inc. reissued 1,000 shares of its treasury stock for 10,000. Prior to the resistance, the treasury stock balance was 12,000, which included the 8,000 cost of the 1,000 shares reissued. As a result of this transaction

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treasury stock on the balance sheet will equal 4,000 stockholders equity on the balance sheet will be 10,000 higher

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when a company declares and pays a cash dividend, what are the financial statement effects

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stockholders equity decreases

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what are the effects of a stock split

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the number of shares outstanding increases par value decreases

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when a company issues different classes of shares, it must

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distinguish the rights for each class of stock

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at the date of purchase, an asset's book value typically is equal to its

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market value

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which type of dividend does not reduce the assets of the firm or create a liability

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stock dividend

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the journal entry to record a large stock dividend includes a

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debt to retained earnings credit to common stock

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the effect of a large stock dividend on the accounting equation

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decrease in retained earnings no effect on total stockholders equity an increase in common stock

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par value is also referred to as

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legal capital

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T-balls, inc. bought 1,000 shares of its own stock for $11 per share. Later it reissued all 1,000 shares for $10 per share. The effect of reissuing the treasury stock includes a

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increase in total assets of 10,000 decrease in additional paid-in capital of 1,000

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which of the following organizations are considered hybrid organizations with partnership features and corporate features

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a limited liability company a limited liability partnership an s corporation

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a credit balance in retained earnings indicates that

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net income has exceeded the dividends distributed to shareholders

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bank, rupp, and baroque, inc. began on January 1, 2015 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of $50 par value, 6% cumulative preferred stock. No dividends were declared in 2015. In 2016, BRR declared and paid a $1 dividend to its common stock holders

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dividends in arrears should be disclosed in the notes to the 2015 financial statements

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a ____ P/E ratio indicates investors anticipate an improvement in the company's future results

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higher

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refurbish bought 1,000 shares of its own stock for 8,000. Later it resold the shares for 10,000. The effect of the sale of treasury stock on the accounting equation includes a

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10,000 increase in stockholders equity

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