Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

jeremy harmon > Chapter 9 Financial Accounting > Flashcards

Chapter 9 Financial Accounting Flashcards

1
Q

What are the 6 things incorporations have to do when organizing a corporation?

A 
Organize the corporation
Pay Fees
Sign Charter
File Documents with the state 
Agree to bylaws 
Need to tell the state the maximum amount of shares I am going to sell
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the 4 rights shareholders get?

A

Vote at stockholder meetings
Receive Dividends
Receive share if corporation liquidates
Maintain proportionate ownership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Preemptive Right

A

You have the right to buy more shares to maintain your ownership if you have cash to do so

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What do shareholders have the right to receive but are NOT required to get?

A

Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the 2 parts of Stockholders Equity?

A

Paid-in Capital

Retained Earnings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Paid in Capital includes what 2 things?

A

Represents amounts contributed by stockholders

Include Stock Accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Retained Earnings

A

Amount earned and kept by the corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are 4 characteristics of Common Stock?

A

Basic form of common stock
Have rights of ownership
Benefit most if company succeeds
Risk most if company does not succeed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the 3 characteristics of Preferred Stock?

A

Have Preference in receiving dividends and assets in case of liquidation
Hybrid between common stock and debt
Rare for corporations to issue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the 2 characteristics of par value stock?

A

Arbitrary amount assigned to share of stock

In most states, represents minimum price for shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are 3 characteristics of No-Par Stock?

A

Does not have a par value
May have a stated value
Non Par Company can sell stock for any price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is another name for Paid in Capital in excess of par?

A

Additional Paid In Capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

In terms of journal entries what 2 things happen with Preferred Stock?

A

Preferred stock is credited for the shares Issued multiplied by the par value
- A separate paid in capital account is used if stock is issued above par

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Common and Preferred Stock both follow the same…

A

Pattern in terms of journal entries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Authorized ( In terms of stock)

A

Maximum number of shares company can issue as indicated on charter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Issued ( In Terms of Stock)

A

Number of shares company has sold to shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Outstanding (In terms of Stock)

A

Number of shares currently in shareholders possession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

In stock terms if there is any difference between issue and outstanding that is due to what?

A

Treasury Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Treasury Stock

A

Company owns stock that it has issued and later reacquired

20
Q

What are 3 reasons why company has Treasury Stock?

A

All authorized shares have been issued and shares are needed for employee stock purchase plans

  • Company wants to purchase its shares at a low price and then re-issue them at a higher price
  • Management wants to avoid a takeover
21
Q

What are 4 accounting rules of Treasury Stock?

A

Recorded at cost (not par value)
Contra-equity account (debit balance)
Reduces stockholders equity and assets
-If sold, paid in capital from treasury stock transactions is credited

22
Q

Retained Earnings Balance Equation

A

Balance = Net income - net losses - dividends declared

23
Q

Debit Balance =

A

Deficit

24
Q

Debit Balance = Deficit means…

A

Losses and dividends exceed equations

25
Q

Dividends

A

Are distributions of retained earnings

26
Q

What are retained earnings NOT equal to?

A

CASH

27
Q

What are 3 forms of Dividends?

A

Cash
Stock
Noncash assets

28
Q

With Cash Dividends what 2 things must a company have?

A

Enough Retained Earnings to declare the dividend

Enough Cash to pay the dividend

29
Q

What are 3 important Dividend Dates?

A

Date of Declaration
Date of Record
Date of Payment

30
Q

What are 2 important characteristics of Date of Declaration?

A

Board of Directors announces dividends

Corporation is now obligated to pay

31
Q

Date of Record

A

Stockholders who own shares on this date will receive dividend

32
Q

Date of Payment

A

Payment sent to shareholders on record

33
Q

When accounting for dividends, what happens to the accounting equation in the big picture?

A

Owners Equity ⬇️

Assets ⬇️

34
Q

If retained earnings increase what happens to net income and dividends?

A

Dividends ⬆️

Net Income⬇️

35
Q

If retained earnings decrease what happens to net income and dividends?

A

Net Income⬇️

Dividends ⬇️

36
Q

What is the order that dividends get paid? (4 groups)

A

Dividends in arrears
Cumulative Preferred Shareholders
Preferred Shareholders
Common Stock Shareholders

37
Q

Who receives dividends FIRST: preferred or common shareholders?

A

Preferred Shareholders

38
Q

Dividends in arrears

A

Cumulative preferred shareholders that have not been paid yet

39
Q

What are the 2 reasons corporations distribute stock dividends?

A

Provide dividend, yet conserve cash

Reduce market price of shares

40
Q

What are 2 characteristics of Small Stock Dividends?

A

Less than 25% of outstanding shares

Recorded at market value

41
Q

What are 2 characteristics of Large Stock Dividends?

A

Greater than 25% of outstanding shares

Recorded at par value

42
Q

What 2 things have no effect on the Accounting equation?

A

Stock Dividend

Stock Split

43
Q

What happens to the accounting equation when paying cash dividends?

A

Assets ⬇️
Liabilities ⬇️
Owners Equity unchanged

44
Q

What happens to the accounting equation when declaring cash dividends?

A

Assets no effect
Liabilities ⬆️
Owners Equity⬇️

45
Q

What happens to the accounting equation when selling treasury stock?

A

Assets ⬆️
Liabilities no effect
Owners Equity⬆️

46
Q

What happens to the accounting equation when purchasing treasury stock?

A

Assets ⬇️
Liabilities no effect
Owners Equity ⬇️

47
Q

What happens to the accounting equation when issuing stock?

A

Assets ⬆️
Liabilities no effect
Owners Equity ⬆️

jeremy harmon (108 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions