Contributed Capital Flashcards
Stock repurchased later by the company after it is originally sold is called…
treasury stock
The primary ownership unit in a company is called…
common stock
The maximum amount of shares that a corporation can issue is called…
authorized shares
True or false: the number of authorized shares can be increased by a shareholder vote.
true
The number of authorized shares is established in a document called the…
articles of incorporation
This is the equation to calculate the number of authorized shares.
authorized shares =
issued shares + unissued shares
The amount of shares issued to shareholders is called the…
issued shares
This is the amount of shares that are owned outside of the company (not bought back)…
outstanding shares
This is the equation for calculating the number of outstanding shares.
outstanding shares =
issued shares - treasury stock
This is the equation for calculating the number of issued shares.
issued shares =
outstanding + treasury
What is a call feature?
it provides the issuer the right to repurchase preferred shares at a specified price
What is a conversion feature?
It allows preferred shareholders to convert their shares into common shares.
What is a participation feature?
It allows preferred shareholders to share equally with common shareholders in dividends.
This type of preference for preferred stockholders states that preferred shareholders can receive dividends before common shareholders.
dividend preference
This type of preference for preferred stockholders states that, if a company fails, assets sold in liquidation go first to pay debtors, next to preferred shareholders and finally to common stockholders.
liquidation preference
The cumulative profit that has been retained by the company is also known as…
earned capital or retained earnings
Which type(s) of dividends reduce stockholders’ equity?
cash and property dividends
Which type(s) of dividends do NOT reduce stockholders’ equity?
stock dividends
What does it mean when dividends are “cumulative?”
The unpaid prior years’ dividends are paid to preferred shareholders before any payment for the current year.
The unpaid prior years’ dividends are also called…
Dividends in Arrears
When you record a stock dividend, which accounts are affected and how?
retained earnings decreases,
contributed capital increases
How do your retained earnings decrease in the case of a SMALL stock dividend?
they decrease by the market value of stock distributed
How do your retained earnings decrease in the case of a LARGE stock dividend?
they decrease by the par value of stock distributed
What range is considered a SMALL stock dividend?
When the company has majority stake in itself, outstanding less than 20-25%
What range is considered a LARGE stock dividend?
When outside stakeholders hold a lot of stake in the company, greater than 20-25%
Common stock is typically purchased by…
your average joe
Preferred stock is typically purchased by…
higher-ups, executives
True or false: common shareholders have voting rights for the company.
true!
True or false: preferred shareholders get voting right for the company.
false!
What accounts are impacted by the issuance of stock? (journal entry)
Dr. Cash
Cr. Common Stock
Cr. Addtl. Paid-In Capital
What accounts are impacted by the repurchase of stock? (journal entry)
Dr. Treasury Stock
Cr. Cash
What accounts are impacted by the resale of treasury stock? (journal entry)
Dr. Cash (# of shares x selling price)
Cr. Treasury Stock
(# of shares x OG market price)
Cr. Addtl. Paid-In Capital
(excess to balance out the sheet)
