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Accounting II > Chapter 20 - Corporations : Formation and Capital Stock Transactions > Flashcards

Chapter 20 - Corporations : Formation and Capital Stock Transactions Flashcards

1
Q

FORMING A CORPORATION

corporate charter

A
  • a document issued by a state government that establishes a corporation
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2
Q

FORMING A CORPORATION

shareholder or stockholder

A
  • a person who owns shares of stock in a corporation
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3
Q

FORMING A CORPORATION

Advantages of the Corporate Form

A
  1. Limited liability
  2. Restricted agency
  3. Continuous expense
  4. Transferability of Ownership Rights
  5. Ease of Raising Capital
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4
Q

FORMING A CORPORATION

Disadvantages of the Corporate Form

A
  1. Corporate Income Tax

2. Governmental Regulation

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5
Q

FORMING A CORPORATION

Subchapter S corporations

A
  • an entity formed as a corporation that meets the requirements of Subchapter S of the Internal Revenue Code to be treated essentially as a partnership, so that the corporation pays no income tax
  • advantages : owners have limited liability and avoid double taxation
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6
Q

FORMING A CORPORATION

limited liability partnership (LLP)

A
  • a partnership that provides limited liability for all partners
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7
Q

FORMING A CORPORATION

Limited liability companies (LLC)

A
  • provides limited liability to the owners, who can elect to have the profits taxed at the LLC level or on their individual income tax returns
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8
Q

FORMING A CORPORATION

bylaws

A
  • the guidelines for conducting a corporation’s business affairs
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9
Q

FORMING A CORPORATION

stockholders’ equity

A
  • the corporate equivalent of owners’ equity; also called shareholders’ equity
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10
Q

TYPES OF CAPITAL STOCK

authorized capital stock

A
  • the number of shares authorized for issue by the corporate charter
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11
Q

TYPES OF CAPITAL STOCK

par value

A
  • an amount assigned by the corporate charter to each share of stock for accounting purposes
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12
Q

TYPES OF CAPITAL STOCK

stated value

A
  • the value that can be assigned to no-par-value stock by a board of directors for accounting purposes
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13
Q

TYPES OF CAPITAL STOCK

market value

A
  • the price per share at which stock is bought and sold
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14
Q

TYPES OF CAPITAL STOCK

common stock

A
  • the general class of stock issued when no other class of stock is authorized; each share carries the same rights and privileges as every other share. Even if preferred stock is issued, common stock will also be issued
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15
Q

TYPES OF CAPITAL STOCK

preemptive right

A
  • a shareholder’s right to purchase a proportionate amount of any new stock issued at a later date
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16
Q

TYPES OF CAPITAL STOCK

preferred stock

A
  • a class of stock that has special claims on the corporate profits or, in case of liquidation, on corporate assets
17
Q

TYPES OF CAPITAL STOCK

liquidation value

A
  • value of assets to be applied to preferred stock, usually par value or an amount in excess of par value, if the corporation is liquidated
18
Q

TYPES OF CAPITAL STOCK

convertible preferred stock

A
  • preferred stock that conveys the right to convert that stock to common stock after a specified date or during a period of time
19
Q

TYPES OF CAPITAL STOCK

callable preferred stock

A
  • stock that gives the issuing corporation the right to repurchase the preferred shares from the stockholders at a specific price
20
Q

TYPES OF CAPITAL STOCK

dividends

A
  • distributions of the profits of a corporation to its shareholders
  • usually paid on a quarterly basis
21
Q

TYPES OF CAPITAL STOCK

cumulative preferred stock

A
  • stock that conveys to its owners the right to receive the preference dividend for the current year and any prior years in which the preference dividend was not paid before common stockholders receive any dividends
22
Q

TYPES OF CAPITAL STOCK

noncumulative preferred stock

A
  • stock that conveys to its owners the stated preference dividend for the current year but no rights to dividends for years in which none were declared
23
Q

TYPES OF CAPITAL STOCK

nonparticipating preferred stock

A
  • stock that conveys to its owners the right to only the preference dividend amount specified on the stock certificate
24
Q

TYPES OF CAPITAL STOCK

participating preferred stock

A
  • stock that conveys the right not only to the preference dividend amount but also to a share of other dividends paid
25
Q

RECORDING CAPITAL STOCK TRANSACTIONS

organization costs

A
  • the costs associated with establishing a corporation
26
Q

RECORDING CAPITAL STOCK TRANSACTIONS

no-par-value stock

A
  • stock that is not assigned a par value in the corporate charter
27
Q

RECORDING CAPITAL STOCK TRANSACTIONS

minute book

A
  • a book in which accurate and complete records of all meetings of stockholders and directors are kept
28
Q

RECORDING CAPITAL STOCK TRANSACTIONS

stock certificate

A
  • the form by which capital stock is issued; the certificate indicates the name of the corporation, the name of the stockholder to whom the certificate was issued, the class of stock, and the number of shares
29
Q

RECORDING CAPITAL STOCK TRANSACTIONS

capital stock ledger, also called stockholders’ ledger

A
  • a subsidiary ledger that contains a record of each stockholder’s purchases, transfers, and current balance of shares owned
30
Q

RECORDING CAPITAL STOCK TRANSACTIONS

capital stock transfer journal

A
  • a record of stock transfers used for posting to the stockholders’ ledger
31
Q

RECORDING CAPITAL STOCK TRANSACTIONS

subscription book

A
  • a list of the stock subscriptions received
32
Q

RECORDING CAPITAL STOCK TRANSACTIONS

subscribers’ ledger

A
  • a subsidiary ledger that contains an account receivable for each stock subscriber
33
Q

RECORDING CAPITAL STOCK TRANSACTIONS

transfer agent

A
  • a person or institution that handles all stock transfers and transfer records for a corporation
34
Q

RECORDING CAPITAL STOCK TRANSACTIONS

registrar

A
  • a person or institution in charge of the issuance and transfer of a corporation’s stock

Accounting II (11 decks)

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