Term
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Definition
| an entity separate and distinct from its owners |
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Term
| 2 common ways to classify corporations |
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Definition
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Term
| list two types of purpose classification for corporations |
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Definition
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Term
| list two types of ownership classification for corporations |
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Definition
publicly held (stock offered for sale to general public, may have many stockholders)
privately held (stock not offered for sale to general public, usually fewer stockholders) |
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Term
| list 5characteristics of a corporation |
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Definition
1. separate legal existence
2. limited liability of stockholders
3. transferable ownership rights
4. ability to acquire capital
5. continuous life |
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Term
| define separate legal existence of a corporation |
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Definition
acts of owners do not bind the company
an entity separate and distinct from its owners |
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Term
| define limited liability of stockholders as it pertains to corporations |
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Definition
| liability of stockholders usually limited to investment. creditors can make claims only on corporate assets - not personal assets of owners (stockholders) |
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Term
| define transferable ownership rights as it pertains to corporations |
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Definition
transfer of stock is at discretion of stockholder and does not require the consent of other owners.
doesn't effect
daily operations
corporate assets, liabilities or ownership equity |
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Term
| define ability to acquire capital as it pertains to corporations |
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Definition
| capital can be increased through the issuance of stock. ability to obtain capital virtually unlimited for successful corporation. |
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Term
| define continuous life as it pertains to a corporation |
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Definition
| not impacted by withdrawal, death or incapacity of a stockholder, employee, or officer - life based on charter. |
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Term
| controller's responsibilities |
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Definition
1. maintain accounting records
2. maintain adequate system of internal control
3. prepare financial statements and reports |
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Term
| treasurer's responsibilities |
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Definition
1. custody of funds
2. maintain company's cash position |
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Term
| government regulation of a corporation include 4 types |
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Definition
1. state law
2. SEC law
3. stock exchange requirements
4. federal regulations |
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Term
| list 3 disadvantages of a corporation |
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Definition
1. separation of ownership and management
2. government regulations
3. additional taxes |
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Term
| define charter as it pertains to corporations |
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Definition
document that describes a corporations:
name
purpose
type and # of shares
names of founders
founders shares |
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Term
| controller's responsibilities |
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Definition
1. maintain accounting records
2. maintain adequate system of internal control
3. prepare financial statements and reports |
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Term
| treasurer's responsibilities |
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Definition
custody of corporations funds
maintain company's cash position |
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Term
| disadvantages of corporations (3) |
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Definition
1. separation of ownership and management
2. government regulations
3. additional taxes |
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Term
| how is a corporation formed |
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Definition
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Term
| what do corporate by-laws establish |
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Definition
| internal rules and procedures for conducting business |
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Term
| how do corporations do business in other states |
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Definition
| issuance of a license from that state |
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Term
| what are organization costs |
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Definition
| the costs to form a corporation |
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Term
| how are organization costs recognized |
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Definition
| as they are incurred in keeping with the conservative approach |
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Term
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Definition
| when a corporation has only one class of stock |
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Term
| what 4 rights do common stock holders have |
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Definition
1. vote to elect board of directions and when stockholder approval required
2. share of earnings (dividends)
3. keep same share of ownership (preemptive right.
4. share of assets at liquidation (residual claim)
3. keep same % ownership if new stock issues (preemptive right
4. share in assets upon liquidation (residual claim) |
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Term
| define underwrite as it pertains to corporate stock |
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Definition
| investment banker buys stock a set price, then resells. corporation avoids risk and immediate cash |
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Term
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Definition
| impact already issues shares, therefore do not impact corporate stockholder equity |
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Term
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Definition
| capital stock that the corporate charter has assigned a value |
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Term
| define no-par value stock |
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Definition
| capital stock that the corporate charter has not assigned a value |
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Term
| other names for corporate owner's equity (3) |
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Definition
| stockholders' equity, shareholders' equity, corporate capital |
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Term
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Definition
| total amount of cash and assets paid in to the corporation by stockholders in exchange for capital stock (not usually dividend generating) |
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Term
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Definition
| net income that a corporation retains for future use (best indicator of continued existence and growth of a company) |
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Term
| the issuance of common stock affects what accounts |
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Definition
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Term
| can a corporation issue stock for services and noncash assets? |
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Definition
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Term
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Definition
| corporation's own stock that was issued and then reacquired from shareholders, but not retired. |
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Term
| why do corporations acquire treasury stock (5 reasons) |
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Definition
1. to reissue to officers or employees
2. to raise market value)
3. to use in acquisition of other companies
4. to increase earnings per share
5. to thwart hostile takeover |
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Term
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Definition
a different class of stock with a contractual provision(s) that give it priority over common stock.
1. first distribution of earnings
2. first to receive assets during liquidation
3. receive dividends before common stockholders |
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Term
| define cumulative dividend |
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Definition
| preferred stockholder right to unpaid dividends from previous years / priority to pay cumulative over current year common stock dividends |
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Term
| where is stockholder equity reported |
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Definition
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Term
| what is included in balance sheet reporting of stockholder equity |
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Definition
paid-in capital
capital stock
Additional paid-in capital
excess of par
Retained earnings
Less: Treasury stock |
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Term
| define stated value as it pertains to stock |
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Definition
| the amount per share assigned by the board of directors to no-par stock |
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Term
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Definition
| amount of stock a corporation is authorized to sell as indicated in its charter - can include stock not yet sold or offered |
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Term
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Definition
| a pro rata distribution of cash to stockholders |
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Term
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Definition
| the date the board of directors formally declares a dividend and announces it to stockholders |
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Term
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Definition
| a debit balance in retained earnings |
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Term
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Definition
| a corporation's distribution of cash or stock to its stockholders on a pro rata basis |
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Term
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Definition
| the net income earned by each share of outstanding common stock |
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Term
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Definition
| a dividend declared out of paid-in capital |
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Term
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Definition
| the date dividend checks are mailed to stockholders |
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Term
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Definition
| the correction of an error in previously issued financial statements |
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Term
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Definition
| the date when ownership of outstanding shares is determined for dividend purposes |
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Term
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Definition
| net income that is retained in the business |
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Term
| retained earnings restrictions |
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Definition
| circumstances that make a portion of retained earnings currently unavailable for dividends |
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Term
| retained earnings statement |
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Definition
| a financial statement that shows the changes in retained earnings during the year |
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Term
| return on common stockholders' equity |
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Definition
| a measure of profitability that shows how many dollars of net income were earned for each dollar invested by the owners; computed as net income minus preferred dividends divided by average common stockholders' equity |
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Term
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Definition
| a pro rata distribution to stockholders of the corporation's own stock |
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Term
| stockholders' equity statement |
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Definition
| A statement that shows the changes in each stockholders' equity account and in total stockholders' equity during the year |
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Term
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Definition
| the issuance of additional shares of stock to stockholders' according to their percentage ownership; is accompanied by a reduction in the par or stated value per share |
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Term
Which of the following is not a major advantage of a corporation?
Separate legal existence.
Continuous life.
Government regulations.
Transferable ownership rights. |
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Definition
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Term
The stockholders' equity section of a corporation's balance sheet consists of
paid-in capital and common stock.
paid-in capital and retained earnings.
common stock and retained earnings.
paid-in capital only. |
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Definition
| paid-in capital and retained earnings. |
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Term
Kim, Inc. issued 5,000 shares of $10 par value common stock for $15 per share. The journal entry to record this transaction would include a
debit to Cash for $50,000.
credit to Common Stock for $50,000.
credit to Paid-in Capital in Excess of Par Value-Common Stock for $75,000.
credit to Common Stock for $75,000. |
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Definition
| credit to Common Stock for $50,000. |
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Term
Treasury stock may be repurchased
to reissue the shares to officers and employees under bonus and stock compensation plans.
to signal to the stock market that management believes the stock is underpriced.
to have additional shares available for use in the acquisition of other companies.
all of these. |
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Definition
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Term
On January 2, 2010, Riley Corporation issued 20,000 shares of 6% cumulative preferred stock at $100 par value. On December 31, 2013, Riley Corporation declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in 2013 before any distribution is made to common stockholders?
$0
$120,000
$360,000
$480,000 |
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Definition
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Term
In the stockholders' equity section of the balance sheet, the classification of capital stock consists of
additional paid-in capital and common stock.
common stock and treasury stock.
common stock, preferred stock, and treasury stock.
common stock and preferred stock. |
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Definition
| common stock and preferred stock. |
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Term
Stockholders have all of the following rights except to
share corporate earnings through receipt of dividends.
vote for the corporate officers.
keep the same percentage ownership when new shares of stock are issued.
share in assets upon liquidation. |
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Definition
| vote for the corporate officers. |
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Term
Retained earnings is
always equal to the amount of cash that the corporation has generated from operations.
a part of the paid-in capital of the corporation.
a part of the stockholders' claim on the total assets of the corporation.
closed at the end of each accounting period. |
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Definition
| a part of the stockholders' claim on the total assets of the corporation. |
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Term
When companies acquire noncash assets in exchange for common stock, they record the assets at the
par value of the stock.
stated value of the stock.
market value of the stock.
authorized value of the stock. |
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Definition
| market value of the stock. |
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Term
In the stockholders' equity section, the cost of treasury stock is deducted from
Total paid-in capital and Retained earnings.
Retained earnings.
Total stockholders' equity.
Common stock in paid-in capital. |
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Definition
| Total paid-in capital and Retained earnings. |
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Term
Preferred stockholders have a priority over common stockholders as to (Points : 1)
dividends only.
assets in the event of liquidation only.
voting rights.
both dividends and assets in the event of liquidation. |
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Definition
| both dividends and assets in the event of liquidation. |
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Term
Which of the following is not reported under Additional Paid-in Capital? (Points : 1)
Paid-in Capital in Excess of Par Value-Common Stock.
Common stock.
Paid-in Capital in Excess of Stated Value-Common Stock.
Paid-in Capital from Treasury stock. |
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Definition
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Term
| Three dates are important in connection with dividends |
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Definition
| (1) the declaration date, (2) the record date, and (3) the payment date. |
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Term
| list three conditions needed for a corporation to pay a cash dividend |
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Definition
1. adequate cash
2. retained earnings
3. a declaration of dividends |
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Term
| what 4 forms can dividends take? |
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Definition
| cash, stock, scrip, or property |
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Term
| what 2 ways can dividend value be expressed? |
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Definition
1. a dollar amount per share
2. a percentage of par or stated value of the stock |
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Term
| list 3 dates that are important in connection with dividends |
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Definition
1. declaration date
2. record date
3. payment date |
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Term
| list 3 reasons stock dividends would be issued |
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Definition
1. to satisfy stockholders' dividend expectations without spending cash
2. to increase the marketability of stock by increasing the number of shares
3. To emphasize that a portion of stockholders' equity has been permanently reinvested in the business and is unavailable for cash dividends |
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Term
| list two sizes of stock dividend |
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Definition
small (less than 20-25%) and large (more than 20-25%):
fair market value is assigned to small and par or stated value to large. |
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