Chapter 18 Study Notes

Question 1

When issuing shares as consideration they should be valued at

Answer 1

Fair value

Question 2

comprehensive income

Answer 2

total nonowner change in equity for a reporting period.
includes;
1. net holding gains(losses) on investments
2. Gains(losses) from and amendments to postretirement benefit plans
3. Deferred gains (losses) on derivatives
4.Gains(losses) from foreign currency translation

Question 3

Accumulated other comprehensive income

Answer 3

Cumulative basis of OCI on the balance sheet, reported in two components

1. components of comp inc created during the current period
2. comprehensive income accumulated over the current and prior periods

Question 4

statement of shareholders equity

Answer 4

reports the transactions that cause changes in its shareholders equity account balances

Question 5

paid in capital

Answer 5

consists primarily of amounts invested by shareholders when they purchase shares of stock from the coporation

Question 6

Comprehensive Income

Answer 6

shows total non owner change in equity for a reporting period
also includes other income not reported in the income statements:
net holding gains/losses
gains/losses from and amendments to post-retirement benefit plans
Deferred gains/losses on derivatives
gains/losses from foreign currency translation

Question 7

accumulated other comprehensive income(AOCI)

Answer 7

OCI reported periodically on the balance sheet

Question 8

corporations

Answer 8

have limited liability,
ease of raising capital
more paperwork
double taxation

Question 9

not for profit organizations may be owned by

Answer 9

1. the public sector

2. by a governmental unit

Question 10

corporations for profit may be

Answer 10

1. publicly held and trade:

2 privately held

Question 11

SCorp

Answer 11

has the characteristic of both a corporation and a partnership

Question 12

limited liability company

Answer 12

owners are not liable for the debts of the business, except to the extent of their business

Question 13

limited liability partnership

Answer 13

similar to a LLC but it doesn’t offer the same protection

Question 14

articles of incorporation

Answer 14

describe

a. the nature of the firm’s business activities
b. the shares to be issued
c. the composition of the initial board of directors

Question 15

common shareholder rights

Answer 15

the right to vote on matters that come before the shareholders,
b. the right to share profits when dividends are declared.
c. the right to share in the distribution of assets if the company is liquidated
sometimes they also receive a preemptive right or the right to retain ones ownership percentage, is more uncommon

Question 16

preferred shares

Answer 16

receive dividends before common also have a preference when assets are distributed in the event of liquidation

Question 17

right of conversion

Answer 17

allows the shares to be converted into common

Question 18

redemption privilege

Answer 18

the right to redeem shares for cash

Question 19

cumulative

Answer 19

if a preferred share is cumulative it means that before any dividends are paid to common then the div. from previous years must be caught up before they pay the common shareholders

Question 20

shares that are redeemable by mandate are classified as liabilities

Answer 20

if they have to buy them back then it is debt

Question 21

Common stock is valued at

Answer 21

par value 
JE
Cash                 1000
      Common Stock        100
      Paid in Cap             900

Question 22

when property is exchanged for stocks the property is valued at

Answer 22

fair value

Question 23

share issue costs

Answer 23

are subtracted from the cash and the PIC

Question 24

retire stock

Answer 24

to buy it back for cash and get rid of the share

reduces the amount in common stock and PIC

Question 25

treasury stock

Answer 25

recorded at cost - par
shares repurchased and not retired
share repurchase is debited to the extent of a credit balance in PIC then RE

Question 26

payments made to retire shares are

Answer 26

viewed as distribution of property

Question 27

deficit

Answer 27

a debit in RE

Question 28

dividend

Answer 28

cash

Question 29

liquidating dividend

Answer 29

a dividend that takes out of the invested capital

Question 30

date of record

Answer 30

registered stock owners are entitled to receive a dividend on this date

Question 31

ex dividend date

Answer 31

date cut off that a shareholder must have the share to receive the dividend

Question 32

property dividend

Answer 32

non cash distribution

before giving dividend the property must be written up to fair value

Question 33

stock dividend

Answer 33

distribution of additional shares
RE
Comm Stock
PIC

Question 34

stock split

Answer 34

a large stock dividend

Question 35

pg1106

Answer 35

there