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34 Cards in this Set
- Front
- Back
Authorized number of shares
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Maximum number of share of a corporation capital stock that can be issued as specified in the charter.
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Issued Stock
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The total number of shares of stock that have been sold.
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Treasury Stock
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The stock that has been bought back by the company.
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Outstanding shares
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Total number of shares that are owned by the stockholders at any particular date.
Issued Shares - Treasury Stocks Reported on the balance sheet. |
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Common stock
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The basic voting stock issued by a corporation
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Par Value
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Nominal value per share of capital stock specified in the charter. It serves as basis for legal capital.
No relationship to the market value of the stock. |
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Legal Capital
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Permanent amount of capital defined by state law that must remain invested in the business; serves as a cushion for investors.
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Initial Public Offering
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Involves the first initial sale of a company's stock to the public.
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Journal Entry for Issuance for stock
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Cash (A+)
Common Stock (SE+)[C] Capital in excess of par value (SE+)[C] |
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Journal Entry for Purchase of Treasury Stock
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Treasury Stock (-XSE, -SE) [D]
Cash (A-) [C] |
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Journal Entry for Resale of Treasury Stock (For more than what was bought)
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Cash (A+) [D]
Treasury Stock (-XSE, SE+)[C] Capital in excess of par (SE+)[C] |
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Journal Entry for Resale of Treasury Stock (For Less than what was bought)
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Cash (A+)
Capital in excess of par (SE-)[D] Treasury Stock (-XSE, SE+)[C] |
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Dividend Yield Ratio
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Dividends per share / Market Price per share
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Declaration Date
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Date on which the board of directors officially approves the dividend. This creates a dividend liability,
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Record Date
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This is the date on which the corporation prepares the list of current stockholders based on its records. The dividend is only payable to people on the list at this date.
No journal Entry |
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Payment Date
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Cash is distributed, to pay the dividends liability.
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Journal Entry of Declaration Date
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Retained Earnings (-SE) [D]
Dividends Payable (L+)[C] |
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Journal Entry of Payment Date
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Dividends Payable (L-)[D]
Cash (A-) [C] |
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2 Requirements for Cash Dividends
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1) Sufficient Retained Earnings
2) Sufficient Cash: There is money left over after purchase of assets, equipment |
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Stock Dividends
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Distribution of additional shares of a corporation's own stock. Sold to the stockholders with no cost to the stockholders.
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Pro rata basis
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Stockholders with a certain percentage gets additional shares equal to the percentage of shares held
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Stock dividends
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Usually drops the price of the stock. So in relatively, the people are just back to the same place they are at.
They make it more attractive more new investors. It's cheaper to invest. |
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Transfering accounts (Stock Dividends)
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Transfer an additional amount from "Retained Earnings" or "Capital in Excess of Par" into the "Common Stock"
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Large Stock dividends
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More than 20-25% of outstanding shares.
Amount transfered to "Common Stock" is based on "par value of additional stock issued" |
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Small Stock dividends
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Less than 20-25%
Amount transfered is Common Stock account Excess transferred to "Capital in Excess of Par Value" account. |
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Journal Entry for Large Stock Dividend
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Retained Earnings (-SE)[D]
Common Stock (SE+)[C] This doesn't change the actual "Stockholder's Equity" account |
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Stock Split
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An increase in total number of authorized shares by a specified ratio. Does not decrease retained earnings.
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Transfering accounts (Stock Split)
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There is no transfereing of retained earnings is required.
This is done by reducing the par value, so it is still the same. 2-for-1. So bring in 1 stock, and get 2 in its place. |
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Similarities and Differences between Stock Split and Stock Dividend
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They are similiar because they increase the number of shares of stockholder's without the stockholders having to invest in it.
It's different because Stock Split doesn't require a journal entry or transfering of accounts. It is just mentioned in the "Financial Statements" |
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Prefered Stock
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Stock that has specified rights over common stock
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Preferred Stock Advantages
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-- doesn't dilute the ownership of the company. Because preferred stock holders don't get voting rights.
-- Preferred is less risky. They receive priority payment of dividends and distribution of assets. -- Fixed dividend rate |
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Current Dividend Preference
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Feature of preferred stock that grants priority on preferred dividends over common dividends.
This must be paid before common stock dividends are paid. |
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Cumulative Dividend Preference
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Preferred stock feature that requires specified current dividends not paid in full to accumulate for every year in which they are not paid.
These cumulative preferred dividends must be paid before any common dividends can be paid. |
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Dividends in arrears
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Dividends on cumulative preferred stock that have not been declared in prior years.
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