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Corporate Accounting > 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

https://s3.amazonaws.com/classconnection/142/flashcards/21729142/png/annotation_2020-09-02_204758-17451A669BB4580B544.png

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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
Q

stock issuance

A

stockholders

underwriters

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26
Q

issuing stock at par value

A

par= $1
dr. cash $1

cr. common stock $1

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27
Q

premium

A

the amount above par at which stock is offered

par value = 1$

premium = $1.25

not a gain, income, or profit.

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28
Q

paid in capital in excess of par

A

represents amounts received from stockholders above par value

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29
Q

premium stock j/e

A

dr. cash
cr. common stock @ par

cr paid in capital excess of par at difference above par

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30
Q

common stock always recorded as

A

par

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31
Q

no par common stock

A

no paidin capital prem acct.

dr. cash

cr common stock

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32
Q

stated value issuance

A

dr. cash
cr. common stated val.

cr. excess stated

stated instead of par

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33
Q

stock for assets other than cash

A

same j/e as cash for stock

recorded at market value of either stock issued or assets rcvd, whichever is more clearly determined

34
Q

prefered issuance

A

dr cash
cr prf. stock @ par

cr paid in capital prf over par.

35
Q

balance sheet

A

paid in capital
prf stock

par/stated

 excess

common stock

par/stated 

 excess

R/E

36
Q

Treasury Stock

A

a corporations own stock previously issued and bought back by company

37
Q

stock buy backs

A

increase value, avoid takeover, support stock price, reward employees

38
Q

treasury stock account

A

contra equity dr. normal balance.

recorded at cost of purchase without reference to par/stated value

subtracted from equity

39
Q

What is Outstanding stock?

A

(Issued stock) - (Treasury stock)

  • Stock that is currently held by investors.
40
Q

purchase of treasury stock

A

dr stock

cr cash

41
Q

sale of treasury stock

A

dr. cash

cr treasury stock

42
Q

sale of treasury above cost

A

dr. cash
cr. treasury stock

cr PIC from treasury stock

43
Q

treasury sale below cost

A

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
Q

retirement of stock

A

buy back and cancel stock

45
Q

retire stock j/e

A

dr stock

cr cash

46
Q

Dividends

A

Cash payments to stockholders

requires a profit (net income, r/e)

47
Q

Legal capital

A

The portion of stockholders’ equity that cannot be used for dividends

48
Q

Declaration Date

A

The date on which the board of directors officially approves a dividend

49
Q

date of record

A

date directors specify for identifying stockholders to receive dividends

50
Q

Payment Date

A

date dividends are actually paid

51
Q

dividend j/e

A

dr cash dividends

cr dividends payable

52
Q

dividends paid on

A

outstanding stock

53
Q

paying dividend j/e

A

dr. div payable

cr cash

54
Q

closing cash dividend acount to r/e

A

decreases retained earnings

dr r/e

cr. cash div

55
Q

dividends on preferred par stock

A

= outstanding shares, * par val*div rate

56
Q

dividends paid to

A

preferred shareholders first

common shareholders as a residual only if dividend is large enough

57
Q

cumulative preferred stock

A

owners receive prior dividends not paid (in arrears) before any dividends to common stock

58
Q

non cumulative dividend

A

current period dividend only

59
Q

dividends in arrears

A

not a liability. only effective as of declaration date as div payable

should be in notes on fin stmts

60
Q

stock dividend

A

a distribution by a corp of its own stock to shareholders

61
Q

stock dividends

A

impact equity accounts but have no effect on total equity

does not affect Assets/liab

62
Q

stock dividends can

A

conserve cash
reduce stock price (more supply)

reward investors

63
Q

small stock dividend

A

<20-25% of issued & outstanding stock

recorded at market value

64
Q

declaration of small stock dividend

A

dr. stock div (market)
cr common stock div

cr PIC excess par

65
Q

Large stock dividend

A

> 25% issued/ outstanding stock

66
Q

continuing operations

A

business that continues from year to year

67
Q

discontinued operations

A

business segments sold or closed

68
Q

statement of r/e

A

net income less dividends

69
Q

deficit

A

debt

70
Q

appropriation of r/e

A

recorded by j/e

71
Q

prior period adjustment

A

the correction of an error in previously issued financial statements.

72
Q

statement of stockholders equity

A

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73
Q

Earnings per share

A

most widely used business statistic

74
Q

EPS formula

A

(net income- preferred dividends)/Average number of shares outstanding

75
Q

Earnings per share reflects

A

amount of company’s net income/loss for each share of its common stock

76
Q

Price/earnings ratio (P/E Ratio)

A

ratio of market price common stock to earnings per share

77
Q

P/E Ratio Reflects

A

value value the stock market places on $1 of a company’s earnings

78
Q

P/E Ratio Formula

A

Market price per share common stock/earnings per share

79
Q

P/E Ratio use for investors

A

ROI ability

80
Q

Rate of Return on Common Stock

A

relationship between net income available to common stockholders and their average common equity

Corporate Accounting (5 decks)

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