Accounting Chapter 8

separate and distinct

An entity ____ and ____ from its owners

LIABILITIES + OWNERS’ EQUITY

ASSETS =

Residual Claim

Share in assets upon liquidation in proportion to their holdings

Authorized Stock

Charter indicates the amount of stock that a corporation is authorized to sell.

stockholders’ equity section

The number of authorized shares is often reported in the

accounting entry

An autorized stock has no formal ______

directly, indirectly

Companies issue common stock _____ to investors or ______ through an investment banking firm.

prices per share

interaction between buyers and sellers determines the

organized exchanges

Stock of publicly held companies is traded on

stockholders

Legal capital is intended to protect

capital

It is relatively easy for a corporation to obtain _____ through the issuance of stock

Paid-In Capital

The total amount of cash and other assets paid into the corporation by stockholders in exchange for capital stock

Retained Earnings

net income that a corporation retains for future use

Paid in Capital and Retained Earnings

Two Primary Sources of Equity

Preferred Stock

have a priority as to:

1. Distributions of earnings (dividends).

2. Assets in the event of liquidation.

Voting Rights

Prefferred stock do not have ______

Treasury Stock

a corporation’s own stock that it has reacquired from shareholders but not retired

Cost

Companies generally use the _____method when purchasing treasury stock

contra stockholders’ equity

Treasury stock is a _________ account

stockholders’ equity

Treasury stock reduces ________

capital stock transactions

when stock is issued, the income statement is not involved

1) Retained earnings

2. Adequate cash

3. A declaration of dividends by the Board of Directors.

For a corporation to pay a cash dividend, it must have

None

What entry is made on the date of record?

Cumulative Dividend

Preferred stockholders must be paid both current-year dividends and any unpaid prior-year dividends before common stockholders receive dividends

Small stock dividend

less than 20–25% of the corporation’s issued stock, recorded at fair market value

Large stock dividend

greater than 20–25% of issued stock, recorded at par value

Market

______ value per share should be assigned to the dividend shares

addition to capital stock

Common Stock Dividends Distributable is reported as an