F:13 Corporations

Question 1

Appropriation of Retained Earnings

Answer 1

Restriction of a portion of retained earnings that is recorded by a journal entry

a restriction of a portion of retained earnings

Question 2

Authorized Stock

Answer 2

The maximum number of shares of a stock that the corporate charter allows the corporation to issue

Question 3

Capital Stock

Answer 3

the individual’s ownership of the corporation’s capital

Question 4

Common Stock

Answer 4

represents the basic ownership of a corporation

Question 5

Corporation

Answer 5

A business organized under state law that is a separate legal entity

Question 6

Cumulative Preferred Stock

Answer 6

Preferred stock whose owners must receive all dividends in arrears plus the current year dividend before the corporation pays the dividends to the common stockholders

a type of preferred stock with a provision that if any dividend payments have been missed in the past, the dividends owed must be paid out to cumulative preferred shareholders first

Question 7

Deficits

Answer 7

Debit balance in the Retained Earnings account

Question 8

Dividend

Answer 8

a distribution of a corporation’s earnings to stockholders

Question 9

Dividend in Arrears

Answer 9

A preferred stock dividend is in arrears if the dividend has not been paid for the year and the preferred stock is cumulative

Question 10

Earnings Per Share (EPS)

Answer 10

(EPS) Amount of a company’s net income (loss) for each share of its outstanding common stock
(Net income - Preferred dividends) / Weighted average number of common shares outstanding

Question 11

Income tax expense

Answer 11

Expense incurred by a corporation related to federal and state income taxes

Question 12

Issued stock

Answer 12

Stock that has been issued but may or may not be held by stockholders

Question 13

Issue Price

Answer 13

The amount that the corporation receives from issuing stock

Question 14

Large Stock Dividend

Answer 14

A stock dividend greater than 20% to 25% of the issued and outstanding stock

Question 15

Legal Capital

Answer 15

The portion of stockholders equity that cannot be used for dividends

Question 16

Memorandum Entry

Answer 16

An entry in the journal that notes a significant event, but has not debit or credit amount

Question 17

Noncumulative Preferred Stock

Answer 17

Preferred stock whose owners do not receive passed dividends

Question 18

No-Par Stock

Answer 18

Stock that has no amount (par) assigned to it

Question 19

Outstanding Stock

Answer 19

Issued stock in the hand of the stockholders

Question 20

Paid-In Capital

Answer 20

Represents amounts received from the stockholders of a corporation in exchange for stock

Question 21

Paid-In Capital in Excess of Par

Answer 21

Represents amounts received from stockholders in excess of par value

Question 22

Par Value

Answer 22

An amount assigned by a company to a share of its stock

Question 23

Preemptive Right

Answer 23

Stockholder’s right to maintain their proportionate ownership in the corporation

Question 24

Preferred Stock

Answer 24

Stock that gives its owners certain advantages over common stockholders, such as the right to receive dividends before the common stockholders and the right to receive assets before the common stockholders if the corporation liquidates

Question 25

Premium

Answer 25

The amount above par at which a stock is issued

Question 26

Price/Earnings Ratio

Answer 26

The ratio of the market price of a common stock to the company’s earnings per share. Measures the value that the stock market places on a $1 of the company’s earnings. Market price per share of common stock / Earnings per share

Question 27

Prior-Period Adjustment

Answer 27

A correction to retained earnings for an error of an earlier period

Question 28

Rate of Return on Common Stockholders Equity

Answer 28

Shows the relationship between net income availiable to common stockholders and their average common equity invested into the company
(Net income - Preferred dividends) / Average common stockholder’s equity

Question 29

Retained Earnings

Answer 29

Equity earned by profitable operations of a corporation that is not distributed to stockholders

Question 30

Small Stock Dividends

Answer 30

A stock dividend of less than 20% to 25% of the issued and outstanding stock

Question 31

Stated Value Stock

Answer 31

No-par stock that has been assigned an amount similar to par value

Question 32

Stock Certificate

Answer 32

Paper evidence of ownership in a corporation

Question 33

Stock Dividend

Answer 33

A distribution by a corporation of its own stock to its stockholders

Question 34

Stockholders Equity

Answer 34

A corporation equity that includes paid-in capital and retained earnings

Question 35

Stock Split

Answer 35

An increase in the number of issued and outstanding shares of stock coupled with a proportionate reduction in the par value of the stock

Question 36

Treasury Stock

Answer 36

A corporation’s own stock that it has previously issued and later reacquired

Question 37

Underwriter

Answer 37

A firm that handles the issuance of a company’s stock to the public, usually assuming some of the risk by agreeing to buy the stock if the firm cannot sell all of the stock to its clients