ACC 101 Exam 3 Chapter 8

an entity is _____ and ____ from its owners

sperate and distinct

what are the initial steps of forming a corporation

1. file application with the secretary of state

2. state grands charter

3. corporations develops by-laws

corporations engaged in interstate commerce must obtain a _____ from each state in which they do business

license

____ in election of board of directors and on actions that require stockholder approval

vote

_____ the corporation _____ through receipt of dividends

share; earnings

what is a residual claim

share in assets upon liquidation in proportion to their holdings

charter indicates the amount if stock that a corporation is ____ to sell

authorized

what is the entry for authorized stock

no formal accounting entry

companies issue common stock ______ to investors or ______ through an investment banking firm

directly ; indirectly

factors in setting prince for a new issue of stock

1.companies anticipated future earnings

2. Expected dividend rate per share

3. Current state of the economy

4. Current financial position

5. Current state of the securities market

what kind of value stock is fairly common today

no par value stock

Years ago, power value determined the ______ per share that a company must retain in the business for the protection of the corporate predators

legal capital

In many states the board of directors assigns a ___________ __________ to the no-par shares.

stated value

which of these statements is false?

A. ownership of common stock gives the owner a voting right

B. The stockholders equity section begins with paid in capital

C. The authorization of capital stock does not result in a formal accounting entry

D. Legal capital is intended to protect stockholders

D. Legal capital is intended to protect stockholders (is false)

T/F similar to partners in a partnership stockholders of a corporation have unlimited liability

False

T/F it is relatively easy for a corporation to obtain capital through the inssuence of stock

True

T/F the separation of ownership and management is an advantage to the corporate form of business

Fasle

T/F the journal entry to record the authorization of capital stock includes a credit to the appropriate capital stock account

False

T/F all states require a par value per share for capital stock

False

what is the total amount of cash and other assets pain in to the corporation by stockholders in exchange for capital stock

Paid in capital

what is the net income that a corporation retains for future use

Retained earnings

True or false causes either the fair market value of the consideration given up or the fair market value of the consideration received which ever is more clearly determinable

true

What do preferred stockholders have a priority to

1. distributions of earnings dividends

2. assets of liquidation

Generally do not have voting rights

what is a corporations own stock that it has required from shareholders but not retired

treasury stock

(purchase of treasury stock) companies generally use the _______ method

cost method

______ treasury stock for the price paid ti require the shares

debit

treasury stock is a _______ account

contra stockholders' equity

what does treasury stock reduce

stockholders equity

treasury shares do not have what kind of rights

dividend rights or voting rights

treasury stock transactions are classified as ______ transactions

Capital stock

For a corporation to pay a cash dividend it must have what three things

retained earnings, adequate cash, declaration of dividends

declaration date is what

when board authorizes dividends

Record date is what

registered shareholders are eligible for dividend

Payment date is what

when the company issues dividend checks

preferred stockholders must be paid how

dividend in arrears and current dividend

holders of _____ preferred stock must be paid any unpaid prior year dividends and their current years dividend before common stockholders receive dividends

cumulative

what is small stock divided

less than 20-25% of the corporations issued stock, recorded at fair market value

what is large stock dividend

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

Which of the following statements about small stock dividends is true?

A. a debit to Stock Dividends for the par value of the shares issued should be made

B. a small stock dividend decreases total stockholders equity

C. Market value per share should be assigned to the dividend shares

D. A small Stockton brown ordinarily will have an affect on par value per share of stock

C. Market value per share should be assigned to the dividend shares

In the stockholders equity section common stock dividends distributable is reported as an:

A. deduction from total paid in capital and retain earnings

B. Current liability

C. Deduction from retained earnings

D. Addition to the capital stock

D. addition to capital stock

a stock split changes the par value per share but does not effect any balances in _______

stockholders equity

what is net income that a company retains in the business

retained earnings

what do companies report

paid-in capital, retained earnings, accumulated other comprehensive income and treasury stock

retained earnings restrictions can result from what three things

1. legal restrictions

2. contractual restrictions

3. voluntary restrictions

computation of the book value per share involves what following steps

1. compute the preferred stock equity

2.determine the common stock equity

3.determine book value per share

tresury is only in what kind of stock

common stock

TREASURY IS NOT A __________

ASSET!!!!!!

a small stock diving does ____ to stock holders equity

nothing