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69 Cards in this Set
- Front
- Back
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What is a corporation? |
An entity created by law that is separate from its owners |
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What are the owners of Corporations called? |
Stockholders or shareholders |
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What is a privately-held / closely-held Corporation? |
A corporation that does not offer its stock for public sale and usually has few stockholders |
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What is a publicly held Corporation? |
A corporation that offers its stock for public sale and can have thousands of stockholders |
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What does public sale refer to? |
It refers to issues of stock and trading on an organized stock market |
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What are six advantages of corporate form? |
1. Separate legal entity 2. Limited liability of stockholders 3. Transferable ownership rights 4. Continuous Life 5. Lack of mutual Agency for stockholders 6. Ease of Capital accumulation |
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What are two disadvantages of corporate form? |
Government regulation and corporate taxation |
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What organization expenses also called organization cost? |
The cost to organize a corporation including legal fees, promoter fees, and amounts paid to obtain a charter |
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What is a proxy? |
A document that gives a designated agent the right to vote for the stockholder |
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What are five general rights of stockholders? |
1. Vote at stockholders meetings 2. Sell or otherwise dispose of their stock 3. Purchase their proportionate share of any common stock later issued by the corporation 4. Receive the same , if any , on each common share of the corporation 5. Share in any assets remaining after creditors and preferred stockholders are paid when, and if, the corporation is liquidated |
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What is a pre-emptive right? |
A right that protects stockholders proportionate interest in the corporation |
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What is a stock certificate? |
It is proof of share ownership |
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Who is the registrar? |
Someone that keeps stock Holder records and prepares official lists of stockholders for stockholder meetings and dividend payments |
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Who is a transfer agent? |
Someone that assists with purchases and sales of shares by receiving and issuing certificates as necessary |
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What is Capital stock? |
Any shares issued to obtain capital / owner financing |
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What is authorized stock? |
The number of shares that a corporation's Charter allows it to sell |
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What does outstanding stock refer to? |
It refers to issued stock held by stockholders |
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What is market value per share? |
The price at which a stock is bought and sold and expected future earnings, dividends, gross, and other company and economic factors influence market value |
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What is common stock? |
When all authorized shares have the same rights and characteristics |
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What is the par value of stock? |
An amount assigned per share by the corporation in its Charter |
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What is minimum legal capital? |
The least amount that the buyers of stock must contribute to the corporation or be subject to paying at a future date |
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What is no par value stock / no par stock? |
Stock not assigned a value per share by the corporate charter |
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What is stated value stock? |
It is no par stock to which the directors assigned a "stated" value per share and the stated value per share becomes the minimum legal Capital per share in this case |
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What is stockholders Equity / shareholders equity / corporate capital? |
It is a corporation's equity |
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What is the entry to record issuing common stock at par value? |
Debit cash and credit common stock |
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What is premium on stock? |
Something that occurs when a corporation sells its stock for more than par or stated value |
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What is paid in capital in excess of par value? (APIC) |
An equity account used to record the premium |
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What is the entry to record stock sold at a premium? |
Debit cash , credit common stock , and credit paid in capital in excess of par value, common stock (APIC, common stock) |
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What is a discount on stock? |
Something that occurs when a corporation sells that stock for less than par or stated value |
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What is the entry to record a discount on stock? |
Debit cash , debit discount on common stock, and credit common stock |
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What type of account is discount on common stock? |
It is a contra common stock account |
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What is the entry to record the selling of no par common stock? |
Debit cash and credit common stock, no par value |
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What is date of Declaration? |
The date the directors vote to declare and pay a dividend |
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What is the date of record? |
The future date specified by the directors for identifying those stockholders listed in the corporation's records to receive dividends |
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What is date of payment? |
The date when the corporation makes the payment |
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What is the entry to record dividends payable on the date of Declaration? |
Debit retained earnings or dividends and credit common dividend payable |
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What is the entry to record dividends paid on the date of payment? |
Debit common dividend payable and credit cash |
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What is a liquidating cash dividend / liquidating dividend? |
A cash dividend to be paid by returning a portion of the capital contributed by stockholders |
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What is a stock dividend? |
A distribution of additional shares of the corporation's own stock to its stockholders without the receipt of any payment in return |
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What is a small stock dividend versus a large stock dividend? |
A small stock dividend is a distribution of 25% or less of previously outstanding shares versus a large stock dividend is a distribution of more than 25% |
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What type of account is common stock dividend distributable? |
An equity account |
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What is the entry to record the payment of a stock dividend? |
Debit common stock dividend distributable and credit common stock |
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What is a stock split? |
The distribution of additional shares to stockholders according to their percent ownership |
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What is preferred stock? |
Stock that has special rights that give it Priority or senior status over common stock in one or more areas |
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What is the entry to record the issuing of preferred stock? |
Debit cash and credit preferred stock |
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What is cumulative preferred stock? |
A stock that gives its owner's rights to be paid both the current and all prior periods unpaid dividends before any dividend is paid to Common stockholders |
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What is dividend in arrears? |
The unpaid dividend amount of a cumulative dividend |
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What is non cumulative preferred stock? |
A stock that confers no right to Prior periods unpaid dividends if they were not declared in those periods |
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What is a non-participating preferred stock? |
A stock that has a feature that limits dividends to a maximum amount each year |
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What is participating preferred stock? |
A stock that has a feature allowing preferred stockholders to share with common stockholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock |
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What is convertible preferred stock? |
Stock that gives holders the option to exchange their preferred shares for common shares at a specified rate |
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What is callable preferred stock? |
A sock that gives the issuing Corporation the right to purchase / retire this stock from its holders at specified future prices and dates |
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What is the call Price / Redemption value? |
The amount paid to call and retire a preferred share and is set when the stock is issued |
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What is financial leverage? |
When the dividend rate on a preferred stock is less than the rate the corporation earns on its assets, the effect of issuing preferred stock is to increase / lever the rate earned by Common stockholders |
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What is treasury stock? |
A corporation's reacquired shares, similar to unissued stock in several ways |
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What is the entry to record purchase of Treasury shares? |
Debit treasury stock, common and credit cash |
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What is the entry to record selling Treasury stock at cost? |
Debit cash and credit treasury stock, common |
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What is the entry to record selling treasury stock above cost? |
Debit cash, credit treasury stock, common, and credit paid in capital, treasury stock |
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What is the entry to record selling treasury stock below cost? |
Debit cash comma debit paid in capital, treasury stock , debit retained earnings , and credit treasury stock , common |
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What is restricted retained earnings? |
It refers to both statutory / legal and contractual restrictions |
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What is appropriated retained earnings? |
It refers to a voluntary transfer of amounts from the retained earnings account to the appropriated retained earnings account to inform users of special activities that require funds |
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What are prior period adjustments? |
Corrections of material errors in Prior period financial statements including arithmetic mistakes, unacceptable accounting, and missed facts |
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What is the statement of stockholders equity? |
Statement that lists the beginning and ending balances of the equity accounts and describe the changes that occur during the period |
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What are stock options? |
Rights to purchase common stock in a fixed price over a specified period |
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What is the basic earnings per share ratio? |
(Net income - preferred dividends) ÷ weighted average common shares outstanding |
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What is the price earnings ratio? |
Market value / price per share ÷ earnings per share |
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What is the dividend yield ratio? |
Annual cash dividends per share ÷ market value per share |
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What is the book value per common share ratio? |
Stockholders Equity applicable to Common shares ÷ number of common shares outstanding |
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What is the book value per preferred share ratio? |
Stockholders Equity applicable to Preferred shares ÷ number of preferred shares outstanding |
