All of the following are components of stockholders' equity, except ____________.
n/p
Earnings not distributed as dividends to stockholders is known as:
retained earnings
T/F: When comparing the typical sole proprietorship and corporation, the form of business having higher assets and earnings is the corporation.
true
A corporation's officers are appointed by the:
board of directors
T/F: Companies usually rely on angel investors and venture capital firms following an initial public offering.
False (IPO is usually the last stage of equity financing.)
When a corporation issues stock to the general public for the first time, it is known as a(n):
initial public offering
T/F: All privately held corporations are regulated by the Securities and Exchange Commission.
False (All publicly held corporations are regulated by the Securities and Exchange Commission.)
T/F: The general public is entitled to invest in a privately held corporation.
False (A privately held corporation does not allow investment by the general public.)
T/F: Dividends paid are allocated according to the percentage of shares owned by each stockholder.
true
Identify the primary advantages of the corporate form of business compared to a sole proprietorship or partnership. (2)
limited liability; ability to raise capital
Identify the primary disadvantages of the corporate form of business compared to a sole proprietorship or partnership. (2)
double taxation; more paperwork
Shares actually sold, which includes treasury stock
issued stock
Total number of shares available to sell
authorized stock
Shares held by investors
outstanding stock
T/F: There is a direct relationship between the par value and market value of common stock: stocks with a low par value have a low market value, while stocks with a high par value have a high market value.
False (there is no relationship btw par and market value of common stock)
Fairfield Corporation issues 100,000 shares of $1 par value common stock for $10 per share. This transaction:
increases assets and increases stockholders' equity.
On January 1, Year 1, Davidson Corporation issues 1,000 shares of $1 par value common stock for $20 per share. Complete the necessary journal entry for the issuance of common stock by indicating the relevant account names and dollar amounts below. If more
debit cash $20,000; credit common stock $1000; credit additional paid-in capital $19,000
When a corporation acquires shares of its own common stock, it records a:
debit to Treasury Stock for cost
Almond Corporation acquires 10,000 shares of its own $1 par value common stock at $10 per share. The journal entry for this transaction includes a:
debit to Treasury Stock for $100,000
T/F: The Common Stock account increases when treasury stock is resold for more than its original cost.
False (additional paid-in capital increases)
Marina, Inc., acquires 1 million shares of its own $1 par value common stock at $70 per share. It later resells the 1 million shares of treasury stock for $75. We record the $5 difference per share as a:
credit to Additional Paid-in Capital
Delta Corporation acquires 10,000 shares of its own $0.01 par value common stock at $10 per share. It later resells the 10,000 shares of treasury stock for $12. The entry to record this transaction will involve a:
debit cash $120,000; credit to Additional Paid-in Capital for $20,000; credit treasury stock $100,000
T/F: The balance in retained earnings equals all net income, less all dividends, since the company began operations.
True
T/F: If losses exceed income since the company began operations, Retained Earnings will have a credit balance.
False (If losses exceed income since the company began operations, Retained Earnings will have a debit balance.)
Which of the following dates associated with dividends does not require an entry to be recorded?
record date
On the date of declaration of the dividend, we _____.
debit dividends
What is the net effect of a dividend declaration and payment?
reduction in both stockholders' equity and assets
Shareholders can lose no more than the amount they invest in the company is called
limited liability
Corporate earnings are taxed twice�at the corporate level and individual shareholder level.
double taxation
Like an S corporation, but there are no limitations on the number of owners as in an S corporation.
limited liability company
Traces the line of authority within the corporation.
organization chart
Allows for legal treatment as a corporation, but tax treatment as a partnership.
S corporation
Has stock traded on a stock exchange such as the New York Stock Exchange (NYSE).
publicly held corporation
The first time a corporation issues stock to the public.
initial public offering
Describes (a) the nature of the firm's business activities, (b) the shares to be issued, and (c) the composition of the initial board of directors.
articles of incorporation
Record the transactions, assuming Clothing Frontiers has either $1 par value or $1 stated value common stock. January 1 Issues 500 shares of common stock for $39 per share.
debit cash $19,500, credit common stock 500$, credit additional paid in capital $19,000
Record the transactions, assuming Clothing Frontiers has either $1 par value or $1 stated value common stock. April 1 Issues 120 additional shares of common stock for $43 per share.
debit cash $5,160, credit common stock $120, credit additional paid in capital $5,040
California Surf Clothing Company issues 1,000 shares of $1 par value common stock at $32 per share. Later in the year, the company decides to purchase 100 shares at a cost of $35 per share.
Record the purchase of treasury stock.
debit treasury stock $3,500; credit cash $3,500
Divine Apparel has 3,700 shares of common stock outstanding. On October 1, the company declares a $0.75 per share dividend to stockholders of record on October 15. The dividend is paid on October 31. Record October 1 only.
Debit dividends $2,775, credit dividends payable $2,775
Divine Apparel has 3,700 shares of common stock outstanding. On October 1, the company declares a $0.75 per share dividend to stockholders of record on October 15. The dividend is paid on October 31. Record October 15 only.
No journal entry
Divine Apparel has 3,700 shares of common stock outstanding. On October 1, the company declares a $0.75 per share dividend to stockholders of record on October 15. The dividend is paid on October 31. Record October 31 only.
debit dividends payable $2,775, credit cash $2,775
The total number of shares available to sell, stated in the company's articles of incorporation.
authorized stock
The number of shares that have been sold to investors.
issued stock
The number of shares held by investors; excludes treasury shares.
outstanding stock
Stock with preference over common stock in the payment of dividends and the distribution of assets.
preferred stock
The company's own stock that it has repurchased.
treasury stock
the legal capital assigned per share of stock
par value
the amount stockholders have invested in the company
paid-in capital
the shares held by investors
outstanding stock
the total number of shares available to sell
authorized stock
the shares actually sold
issued stock
the portion of the cash proceeds above par value
additional paid in capital
the amount of earnings retained (kept) in the business since the company began
retained earnings
a corporation's own stock that it has acquired
treasury stock
limited liability is
one of the advantages of a corporation
additional taxes is
one of the disadvantages of a corporation
Which of the following accounts is NOT reported in the stockholders' equity section of the balance sheet?
sales rev (ARE: common stock, treasury stock, RE)
Common stockholders usually have all of the following rights except
to participate in the day-to-day oprerations
The disadvantages of the corporate form of business include
additional taxes
authorized common stock refers to the total number of shares
that can be issued
outstanding common stock specifically refers to
stock in the hands of stockholders
issued stock refers to the number of shares
actually sold, including treasury stock
stockholder rights (3)
right to vote, right to receive dividends, right to share in the distribution of assets
authorized equation
issued shares + unissued shares
issued equation
outstanding shares + treasury stock
declaration date
date on which board of directors declares the cash dividend to be paid
record date
(no entry, just a list of people) specific date on which the company will determine who will receive the dividend (registered owners of stock)
payment date
date of the actual cash distribution