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27 Cards in this Set
- Front
- Back
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What are the 5 advantages of being a corporation? |
1. Separate legal entity 2. Limited Liability for shareholders 3. Easy to transfer ownership 4. Easy to acquire capital 5. Continuous and perpetual life |
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What are some disadvantages of being a corporation? |
1. Government Regulation 2. Double Taxation |
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How is a corporation formed and how do they raise capital? |
Loans, issue bonds, and sell shares of stock |
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What is authorized shares of stock? |
The maximum number of shares the corporation is legally allowed to sell. |
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This is disclosed in the corporate charter, has no journal entry, and is shown in the equity section of the balance sheet. |
Authorized Shares of Stock |
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This is shares sold to investors. |
Issued Shares |
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This is shares that have been sold but not reacquired |
Outstanding shares |
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This is previously issued shares of stock reacquired by the corporation.
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Treasury Stock |
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What is the formula for outstanding shares |
OUT = ISSUED - TREASURY |
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This is the "Floor" or de minimis amount meaning shares cannot be sold below this value and has no relation to the market value of stock. |
Par Value |
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Each share carries the following rights during what? To share proportionately - 1. in profits and losses. 2. in management (the right to vote for directors) 3. in assets upon liquidation 4. in any new issues of stock of the same class (preemptive right) |
The absence of restrictive provisions |
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This type of stock gives you residual ownership, meaning you can bear the ultimate risk of loss. |
Common Stock |
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This type of stock receives the benefits of success. |
Common Stock |
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This type of stock does not guarantee dividends nor assets upon dissolution. |
Common Stock |
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This type of stock gives you a right to vote. |
Common Stock |
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This is a additional class of stock that gives you P - Priority D - Dividends A - Assets in event of a liquidation |
Preferred Stock |
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What is the journal entry to sell (issue) no par value or at par? |
Dr. Cash Cr. Common Stock |
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What is the journal entry to sell (issue) above par value |
Dr. Cash Cr. Common Stock Cr. APIC |
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What are some reasons for a treasury stock? |
1. Increase EPS 2. To reissue to board directors and Corporation officers 3. To Eliminate hostile shareholders |
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What happens to equity in a treasury stock? |
Reduction of equity |
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J/E to repurchased treasury stock? |
Dr. Treasury Stock Cr. Cash |
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What is the pro-rata distribution of cash property in stock? |
Dividens |
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In paying dividends DRP stands for what? |
Declaration Date Record Date Payment Date |
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What is the J/E for declaration date? |
Dr. Cash Dividens Cr. Dividens Payable |
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What is the J/E for payment date? |
Dr. Dividens Payable Cr. Cash |
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This is when one share of stock gets split into 2. |
Stock Splits |
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Adjustment to reconcile net income to what? |
To net cash provided by operating activities |
