Week 11 Key Concepts

Question 1

Private company or closely held company

Answer 1

its shares are owned by a small number of people
and that they are not marketed to the general public or sold on public stock exchanges.

Question 2

Public corporations:

Answer 2

have their shares negotiated in capital markets.

Question 3

Components of Shareholders’ Equity in the balance sheet:

Answer 3

Contributed capital (common
stock, preferred shares), and Retained Earnings (accumulation of past net income minus any
distribution of dividends).

Question 4

GAAP rules:

Answer 4

Under ASPE corporations are required to prepare an Income Statement and a
Statement of Retained Earnings. Under IFRS it is mandatory to prepare the Statement of
Comprehensive Income and the Statement of Changes in Equity.

Question 5

Common shares:

Answer 5

claim to earnings of the corporation after commitments to preferred
shareholders have been satisfied. Voting shares of the company. In the event of corporate
dissolution, all of the proceeds of asset disposition, after the setting of claims of creditors and
required distributions to preferred shareholders, are distributable to the common shareholders.

Question 6

Preferred shares:

Answer 6

have special privileges and usually entitles its holder to receive dividends at a
certain rate, which must be paid before dividends can be paid to common shareholders.

Question 7

Authorized Shares:

Answer 7

all shares a corporation can issue to the public, normally a portion is issued.

Question 8

Outstanding shares =

Answer 8

= Issued Shares – Treasury Shares

Question 9

Par value shares:

Answer 9

articles of incorporation set the value of each share, if sold for more than par
the excess goes to the account Contributed Surplus and the par value to Common Shares account

Question 10

Property dividend or dividend in kind:

Answer 10

A distribution of a corporation’s assets other than cash to its shareholders.

Question 11

Stock dividend:

Answer 11

shareholders receive additional shares in proportion to their existing holdings.

Question 12

Stock option:

Answer 12

: is the right to purchase the shares of a corporation at a set price by some set future
date.

Question 13

eBook End of Chapter 11 – Activities recommended
Problems 02 and 05

Answer 13

eBook End of Chapter 11 – Activities recommended
Problems 02 and 05