Acct 11 - Chapter 13

Question 1

CASH DIVIDENDS

Answer 1

A pro rata (equal) distribution of cash to shareholders.

Question 2

COMMON SHARES

Answer 2

Shares where the owners have the right to 1. vote on the election of the board of directors, 2. share in the distribution of profit through dividends, and 3. share any assets that remain after all debts and shares with priority rights have been paid. If the corporation has only one class of shares, they are common shares.

Question 3

CONTRIBUTED CAPITAL

Answer 3

The total amount contributed by the shareholders. Consists of share capital and contributed surplus.

Question 4

CONVERTIBLE PREFERRED SHARES

Answer 4

Preferred shares that the shareholder can convert into common shares at a specified ratio.

Question 5

CORPORATION

Answer 5

A business organized as a separate legal entity, with most of the rights and privileges of a person. Shares are evidence of ownership.

Question 6

CUMULATIVE

Answer 6

A feature of preferred shares that entitles the shareholder to receive current dividends and unpaid prior-year dividends before common shareholders receive any dividends.

Question 7

DECLARATION DATE

Answer 7

The date when the board of directors formally declares a dividend and announces it to shareholders.

Question 8

DEFICIT

Answer 8

A debit balance in the Retained Earnings account created when total losses and dividends to date are greater than total profit to date; it is reported as a deduction from shareholders’ equity.

Question 9

DIVIDEND

Answer 9

A distribution of profit by a corporation to its shareholders on a pro rata basis.

Question 10

DIVIDENDS IN ARREARS

Answer 10

Dividends on cumulative preferred shares that were not declared.

Question 11

INITIAL PUBLIC OFFERING (IPO)

Answer 11

The initial offering of a corporation’s shares to the public.

Question 12

LEGAL CAPITAL

Answer 12

The share capital that must be retained in the business for the protection of corporate creditors.

Question 13

NO PAR VALUE SHARES

Answer 13

Share capital that has not been given a specific value. All the proceeds from the sale of no par value shares are treated as legal capital.

Question 14

NONCUMULATIVE

Answer 14

Preferred shares that are entitled to the current dividend, but not to any unpaid amounts from previous years.

Question 15

ORGANIZATION COSTS

Answer 15

Costs incurred in the formation of a corporation.

Question 16

PAYMENT DATE

Answer 16

The date when cash dividends are paid to shareholders

Question 17

RECORD DATE

Answer 17

The date when ownership of shares is determined for dividend purposes

Question 18

REDEEMABLE (CALLABLE) PREFERRED SHARES

Answer 18

Preferred shares that give the issuer the right to purchase the shares from shareholders at specified future dates and prices.

Question 19

RETAINED EARNINGS

Answer 19

Earned capital (cumulative profit less losses and amounts distributed to shareholders since incorporation) that has been retained for future use. If negative (a debit balance) it is called a “deficit”.

Question 20

RETRACTABLE PREFERRED SHARES

Answer 20

Preferred shares that give the shareholder the right to sell the shares to the issuer at specified future dates and prices.

Question 21

RETURN ON EQUITY

Answer 21

A measure of profitability from the shareholders’ point of view. It is calculated by dividing profit by average common shareholders’ equity.

Question 22

SECONDARY MARKET

Answer 22

A market where investors buy and sell shares of public companies from each other, rather than from the companies.

Question 23

SHARE CAPITAL

Answer 23

The amount paid, or contributed, to the corporation by shareholders in exchange for shares of ownership. It can consist of preferred and common shares.

Question 24

STATEMENT OF RETAINED EARNINGS

Answer 24

A financial statement that shows the changes in retained earnings during the year, used only under ASPE