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Accounting Principles > Chapter 13 > Flashcards

Chapter 13 Flashcards

1
Q

corporation

A

business organized as a legal entity separate and distinct from its owners under state corporation law.

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2
Q

limited liability

A

responsibility of a business’s owners for losses only up to the amount they invest

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3
Q

Mutual agency

A

The ability of partners in a partnership to commit other partners and the business to a contract.

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4
Q

Stockholders

A

owners of a corporation due to their purchase of stock in the corporation

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5
Q

officers

A

manage the coporation

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6
Q

IPO

A

(initial public offering) a company’s first equity issue made available to the public

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7
Q

double taxation

A

taxation of dividends both as corporate profit and as personal income

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8
Q

Corporate charter

A

A document issued by a state government to create a corporation

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9
Q

capital stock

A

total shares of ownership in a corporation

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10
Q

stock certificate

A

proof of stock ownership

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11
Q

Authorized Stock

A

The amount of stock that a corporation is authorized to sell as indicated in its charter

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12
Q

issued stock

A

the number of shares sold to investors; includes treasury shares

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13
Q

outstanding stock

A

issued stock in the hands of stockholders

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14
Q

levels of stock

A

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15
Q

Stockholder’s Rights

A

Vote on Coroprate matters
Receive Dividends
Receive capital appreciation or depreciation on stock disposition
Payment if the corporation liquidates (goes out of business)

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16
Q

preemptive right

A

allows common stockholders to maintain their proportionate ownership in the corporation when new shares are issued, thus protecting them from dilution of their ownership

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17
Q

Common Stock

A

The basic form of ownership in a corporation.

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18
Q

Preferred Stock

A

Stock that has specified rights over common stock

dividends, liquidation

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19
Q

par value

A

an assigned dollar value that is printed on a stock certificate

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20
Q

No-Par Value Stock

A

Capital stock that has not been assigned a value in the corporate charter

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21
Q

Stated value stock

A

No-par stock to which the directors assign a “stated” value per share.

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22
Q

stockholder’s equity

A

Paid in Capital

reatained earningspaid in

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23
Q

paid-in capital

A

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

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24
Q

retained earnings

A

earnings retained by a firm for its use rather than paid out as dividends

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25
stock issuance
stockholders underwriters
26
issuing stock at par value
par= $1 dr. cash $1     cr. common stock $1
27
premium
the amount above par at which stock is offered par value = 1$ premium = $1.25 not a gain, income, or profit.
28
paid in capital in excess of par
represents amounts received  from stockholders above par value
29
premium stock j/e
dr. cash     cr. common stock @        par     cr paid in capital excess of par at difference above par
30
common stock always recorded as
par
31
no par common stock
no paidin capital prem acct. dr. cash   cr common stock
32
stated value issuance
dr. cash   cr. common stated val.   cr. excess stated stated instead of par
33
stock for assets other than cash
same j/e as cash for stock recorded at market value of either stock issued or assets rcvd, whichever is more clearly determined
34
prefered issuance
dr cash     cr prf. stock @ par     cr paid in capital prf over par.
35
balance sheet
paid in capital   prf stock         par/stated         excess   common stock       par/stated         excess R/E
36
Treasury Stock
a corporations own stock previously issued and bought back by company
37
stock buy backs
increase value, avoid takeover, support stock price, reward employees
38
treasury stock account
contra equity dr. normal balance. recorded at cost of purchase without reference to par/stated value subtracted from equity
39
What is Outstanding stock?
(Issued stock) - (Treasury stock) * Stock that is currently held by investors.
40
purchase of treasury stock
dr stock | cr cash
41
sale of treasury stock
dr. cash | cr treasury stock
42
sale of treasury above cost
dr. cash cr. treasury stock cr PIC from treasury stock
43
treasury sale below cost
dr cash dr. PIC treasury stock (up to balance) cr Treasury stock at cost first exhaust any amount in PIC from treasury if it goes below the amount available, it is a debit to r/e
44
retirement of stock
buy back and cancel stock
45
retire stock j/e
dr stock | cr cash
46
Dividends
Cash payments to stockholders requires a profit (net income, r/e)
47
Legal capital
The portion of stockholders' equity that cannot be used for dividends
48
Declaration Date
The date on which the board of directors officially approves a dividend 
49
date of record
date directors specify for identifying stockholders to receive dividends
50
Payment Date
date dividends are actually paid
51
dividend j/e
dr cash dividends |   cr dividends payable
52
dividends paid on
outstanding stock
53
paying dividend j/e
dr. div payable |   cr cash
54
closing cash dividend acount to r/e
decreases retained earnings dr r/e cr. cash div
55
dividends on preferred par stock
= outstanding shares, * par val*div rate
56
dividends paid to
preferred shareholders first common shareholders as a residual only if dividend  is large enough
57
cumulative preferred stock
owners receive prior dividends not paid (in arrears) before any dividends to common stock
58
non cumulative dividend
current period dividend only
59
dividends in arrears
not a liability. only effective as of declaration date as div payable should be in notes on fin stmts
60
stock dividend
a distribution by a corp of its own stock to shareholders
61
stock dividends 
impact equity accounts but have no effect on total equity does not affect Assets/liab
62
stock dividends can 
conserve cash reduce stock price (more supply) reward investors
63
small stock dividend
<20-25% of issued & outstanding stock recorded at market value
64
declaration of small stock dividend
dr. stock div (market) cr common stock div cr PIC excess par
65
Large stock dividend 
>25% issued/ outstanding stock
66
continuing operations
business that continues from year to year
67
discontinued operations
business segments sold or closed
68
statement of r/e
net income less dividends
69
deficit
debt
70
appropriation of r/e 
recorded by j/e
71
prior period adjustment
the correction of an error in previously issued financial statements.
72
statement of stockholders equity
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73
Earnings per share
most widely used business statistic
74
EPS formula
(net income- preferred dividends)/Average number of shares outstanding
75
Earnings per share reflects
amount of company's net income/loss for each share of its common stock
76
Price/earnings ratio (P/E Ratio)
ratio of market price common stock to earnings per share
77
P/E Ratio Reflects
value value the stock market places on $1 of a company's earnings
78
P/E Ratio Formula
Market price per share common stock/earnings per share
79
P/E Ratio use for investors
ROI ability
80
Rate of Return on Common Stock
relationship between net income available to common stockholders and their average common equity

Accounting Principles (9 decks)

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