Ch. 15

Question 1

Owners Capital

Answer 1

• Increased with contributions and any net income

- Decreased with any net loss and withdraws

Question 2

Par Value

Answer 2

• Legal Capital of the corporation
• The minimum price a stock should be sold for at its initial public offering (IPO)
• If a share of stock is sold below par value during the IPO, then the shareholder becomes liable for the difference between the par value and the market value
• Both common and Preferred stock can have par values

Question 3

Additional Paid-in Capital (Add. PIC)

Answer 3

• excess of Par Value

- Used to record value received beyond the par value of the stock

Question 4

Retained Earning

Answer 4

• A corporation’s earnings flow into an account called retained earnings

Question 5

Treasury Stock

Answer 5

• Company/Corporation buys back its own stock
• Not an asset of the corp.
• Reduces stockholders equity
• Reduces the number of shares outstanding

Question 6

Stock Splits

Answer 6

• Reduce the price of the stock, more people can purchase the stock at at a lower price
• Stock Splits require no journal entries (memorandum entry should be used)
  Reduce the par value proportionally
• Increase the number of shares outstanding

Question 7

Recording Corp. Dividends

Answer 7

• Date of Declaration
• Date of Record
• Date of Payment

Question 8

Dividends

Answer 8

• Based on number of shares outstanding = Shares issued - Treasury Stock Shares

Question 9

Stock Dividend

Answer 9

• Purpose is to conserve resources

Question 10

Small Stock Dividend

Answer 10

• Under 20% of the shares outstanding

Question 11

Stock Dividends Distributable - C/S

Answer 11

• Permanent account that will hold the par value of the common stock shares until the common stock shares are issued