AC 210 learnsmart ch. 11

______ shares equals the number of shares _____ minus the number of shares repurchased by the company.
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______ shares equals the number of shares _____ minus the number of shares repurchased by the company.
Outstanding and issued
Sea the World Cruises issued 400,000, $1 par value shares of the 1,000,000 shares authorized for $1,000,000. The entry to record the issuance of the stock includes _____.
credit Common Stock $400,000

debit Cash $1,000,000

credit Additional Paid-in Capital $600,000
Declaration date

Date of record

Payment date
The board of directors officially approves a dividend

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

Dividends payable is decreased
If a corporation goes bankrupt, its stockholders _____.
have residual claim to the assets after the creditors' claims have been satified
______ capital, also called paid-in capital, reports the amount of capital the company received from investors.
Contributed
The effect on the accounting equation of declaring a cash dividend includes _____.
a decrease in stockholders' equity

an increase in liabilities
Investors acquire stock because they expect a return on their investment from _____.
increase in stock prices

distributions of dividends
____ ____ reports the cumulative amount of net income earned by the company less the cumulative amount of dividends since the corporation began.
Retained Earnings
Which form of financing has a tax advantage?
debt financing
If a business cannot pay its debts, creditors can expect the owner(s) to pay the debts with their personal assets if the business is a ____.
general partnership

sole proprietorship
Dividends Payable is a(n) _____ account with a normal _____ balance and is initially recorded on the ____ date.liability, credit, and declarationOwnership structure can vary from one company to another, but the most basic form of corporation offers ____.common stockA corporation _____ have a legal obligation to pay dividends.does notStock splits Stock splits and stock dividends Stock dividendsCause the par value per share to change Cause total stockholders' equity to remain the same Require a journal entryA company's past profits that are kept instead of being paid to stockholders are _____.retained earningsWhen Diva, Inc., declared a $10,000 cash dividend, it recorded a debit to ____ and a credit to Dividends _____.Dividends and PayableThe number of shares issued represents the number of shares _____.soldIma Rich purchased 100 shares of Stockits, Inc.'s, $1 par value common stock from Stockits for $5 per share. Which statements are true regarding the effect of this transaction on Stockits' financial statements?Stockholders' equity on the balance sheet increases. The financing activities section of the statement of cash flows increases.Contributed capital of $1,000,000 represents ______.the amount stockholders have invested in exchange for stock______ _____ reports the cumulative amount of net income earned by the company less the cumulative amount of dividends since the corporation began.Retained EarningsA distribution of a company's accumulated prior earnings is a(n) ______.dividendsWhat are the benefits of common stock?Voting rights A residual claim on assets after creditors and preferred stockholders have been satisfied The right to receive dividends if they are declared A preemptive right to buy newly-issued stock before it is offered to othersAn advantage of ______ financing is that dividends are optional.equityDaffy 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 _____.$50,000 increase in total stockholders' equity $50,000 increase in total assets_____ capital also called paid-in capital, reports the amount of capital the company received from investors.ContributedRetained Earnings represents cumulative ______ by the business.profits retained net income keptThe number of shares outstanding equals the number of shares _____.issued minus the number of shares in treasuryThe journal entry to record the declaration of a dividend includes _____.a debit to Dividends a credit to Dividends PayableAn advantage of _____ financing is interest is tax deductible.debtDaffy 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 _____.$10,000 credit to Common Stock $90,000 credit to Additional Paid-in capital $100,000 debit to cash_____ shares equals the number of shares _____ minus the number of shares repurchased by the company.Outstanding and issuedInvestors acquire common stock because they expect a return on their investment from ____.increases in stock prices distributions of dividendsAdvantages of equity financing over debt financing include that _____.equity financing does not require repayment dividends are optionalA common stock's _____ value is typically set at a low amount and has little meaning today other than being used to by some states to assess fees.parDividends Payable is recorded as a credit on the _____.declaration dateThe entry to record the issuance of preferred stock is ______.similar to the issuance of common stock increases stockholders' equityAnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals ______ shares.100,000A corporation is a separate ______ entity and can own assets, incur liabilities, and enter into contracts.legalAdvantages of debt financing over equity financing are that _____.control is not diluted interest payments on debt are tax deductibleWhen Diva, Inc., declared a $10,000 cash dividend, it recorded a debit to _____ and a credit to Dividends _____.Dividends and PayableReburish, Inc. reissued 1,000 shares of its treasury stock for $10,000. Prior to the reissuance, 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, Refurbish's _____.stockholders' equity on the balance sheet will be $10,000 higher treasury stock on the balance sheet will equal $4,000Lox, Stock and Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ____ shares.45,000The effect on the accounting equation of declaring a cash dividend includes ______.an increase in liabilities a decrease in stockholders' equityAt what governmental level are corporate charters issued?StateDilution Solutions, Inc. repurchased 500 shares of its $2 par value common stock for $10,000. The journal entry to record this transaction includes a ______.$10,000 credit to cash $10,000 debit to treasury stockSimilar to a stock split, a stock _____ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders.dividendStockit Inc. has 1,000 shares 5%, $100 par value, cumulative preferred stock outstanding. In its first two years of business, Stockit did not declare a dividend. Stockit's balance sheets at the end of its first two years of business should include _____.no dividends payableBefore dividends can be paid to common stockholders, the _____ preferred stockholders must be paid _____.cumulative; dividends in arrearsThe Date of _____ is the cut-off date for determining which specific stockholders are to be paid the dividend.recordThe journal entry to record the payment of a previously declared dividend includes a _____.credit to cash debit to dividends payableDividends on preferred stock ______.may be paid at a fixed rate, such as 7% are paid before dividends on common stock are more attractive than common stock dividends to investors who want a stable incomeMega Corporation repurchased 1,000 shares of its $1 par value common stock for $8,000. The effect of this transaction on the accounting equation includes a(n)______.decrease in assets decrease in stockholders' equityEPS is a good predictor offuture stock pricesCorporations can raise large amounts of money because _______.shares of stock in public companies can easily be bought and sold by investorsTreasury Stock _____.reduces total stockholders' equity is a contra-equity account is shares of stock no longer outstandingA stock _____, typically given to employees as part of their compensation that gives them the opportunity to buy the company's stock at a predetermined price, is recorded as an expense at the time it is granted.optionPreferred stockholders ______.have the right to receive dividends only in the years the board of directors declares dividendsThe statement of ______ reports the changes in retained earnings as well as paid-in capitalstockholders' equityWyanot 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 a ______.$10,000 credit to Additional Paid-in Capital - Preferred $100,000 credit to Preferred Stock $110,000 debit to CashA higher ROE means ______.-stockholders may enjoy higher returns -the company used financial leverage to its stockholder's advantageThe journal entry to record reissuing treasury stock at a price below the cost of the treasury stock includes a _____.debit to cash credit to treasury stock debit to additional paid-in capitalA company may be restricted from paying dividends if it has _____.a loan covenantEarnings per share (EPS) may be determined by ______.dividing net income less preferred dividends by the average common shares outstanding dividing the stock price by the P/E ratioWhen a company needs a large amount of long-term financing, it may issue stock, which is referred to as _____ financing, or it may borrow from lenders, which is referred to as ____ financing.equity and debtDilution Solutions, Inc. repurchased 1,000 shares of its $1 par value common stock for $5,000. The journal entry to record this transaction includes a $5,000 ____ to treasury stock.debtCumulative preferred stock is entitled to receive current dividends plus "dividends in _____" before any future common dividends can be paid.arrearsWhich of the following would be found on a statement of stockholders' equity?Treasury Stock Stock issuances Net income dividends Additional Paid-In capitalSquid Roe inc's ROE increased two percentage points to 12%. This increase may have happened because Squid Roe __________generated more profits than the interest incurred on its borrowed funds replaced its 12% debt with 10% debtIn an IPO on May 1, 2009, Timmy Hilfigure purchased 1,000 shares of Abner Crummie, Inc. for $5,000. On April 30, 2018, Timmy Hilfigure sold the 1,000 shares for $8,000 to Ralph Loring. What is the effect of the sale on April 30, 2018?Abner Crummie, Inc., will not be directly affected by this transaction.Shares outstanding equals shares _____ minus ____ shares.issued; treasuryThe dividend payment date is when _____.cash is decreased dividends payable is decreasedA corporation is a separate ____ entity and can own assets, incur liabilities, and enter into contracts.legalCommon stock's par value ______.has become less meaningful because states use other means to prevent stockholders from removing capital from financially distressed companies was introduced to prevent bankrupt companies from unfairly distributing company resources affects how common stock is recordedAdvantages of a corporation are ______.it can raise large amounts of money by issuing stock ownership interests are easily transferableTo raise large amounts of long-term financing, a company issued additional shares of common stock. This form of financing is referred to as _____.equity financingPreferred stock that receives its current dividends and dividends in arrears is ____ preferred stock.cumulativeWhat is the effect on the accounting equation of the entry to record the payment of dividends that were previously declared?assets decrease liabilities decreaseTreasury Stock is _____ account.a contra-equityA corporation is a separate legal entity that can _____.sue or be sued enter into contracts own assetsWhich of these is a separate legal entity?corporationA corporation may be restricted from paying a dividend if _____.a creditor's loan agreement is violated the dividend is greater than the amount of retained earningsIssuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $100 cash per share affects the accounting equation byincreasing additional paid-in capital increasing total assets increasing total stockholders' equityIdentify what is needed to calculate the P/E ratio.Earnings per share Stock priceA(n) _____ public _____ refers to the very first issuance of a company's stock to the public.initial and offeringWhen a shareholder of Limited, Inc. sells its shares to another investor on the stock exchange, Limited, Inc.'s accounting equation ______.is not affected because the corporation is separate from its ownersIf the application to create a corporation is approved, the state issues a charter, also called the articles of ______, which spells out information about the corporation.incorporationThe dividend payment date is when ____.cash is decreased dividends payable is decreasedThe entry to record the issuance of preferred stock is _______.increases stockholders' equity similar to the issuance of common stockWhen a company reissues shares at higher price than the cost to previously purchase the treasury stock, it records a ______.credit to Additional Paid-in CapitalA corporation that has a loan covenant _______.may be required to repay the loan immediately if it violates the covenant must disclose the covenant in the notes to the financial statementsSome states allow corporations to issue no-par value common stocktruethe creation and oversight of all corporations are regulated bystate lawsRisk from Financial Leverage-increases when the cost of borrowing is greater than the return -decreases when a company issues new shares of stockA current dividend preference requires that _____.preferred dividends must be paid before any dividends are paid to common stockholdersWhen a stockholder sells its shares to another person for more than its original cost, the corporation ______.does not make a journal entryRefurbish, Inc., bought 1,000 shares of its own stock for $8,000. Later reissued the shares for $10,000. The journal entry to record the sale of treasury stock includes a(n) ______.$2,000 credit to Additional Paid-in Capital $8,000 credit to Treasury StockBefore the board of directors declares a cash dividend, it should consider whether _____.there are sufficient retained earnings there is sufficient cashReburish, Inc., reissued 1,000 shares of its treasury stock for $10,000. Prior to the reissuance, the Treasury Stock balance was $12,000, which included the $8,000 cost of the 1,000 shares reissued. After recording this transaction, _______.Additional Paid-in capital will be increased by $2,000 Treasury Stock will equal $4,000Why might a company issue a stock dividend?to demonstrate commitment to stockholders while conserving cash during difficult times to signal an expectation of significant future earnings to lower the market price per shareThe repurchase of treasury stock will cause earnings per share (EPS) to _____.increaseA stock dividend ______.decreases retained earnings has no effect on total stockholder's equity increases common stockaccumulated deficitindicates accumulated net losses means that retained earnings has a debit balance is shown in parentheses on the balance sheetThe requisition of preferred stock is referred to as a redemption because the stocks are _____.formally retiredA stock dividend _____.decreases retained earnings has no effect on total stockholders' equity increases common stock