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54 Cards in this Set
- Front
- Back
The residual interest in a corporation belongs to the |
Common stockholders |
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The pre-emptive right of a common stockholder is the right to |
Share proportionately in any new issues of stock of the same class. |
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The pre-emptive right enables a stockholder to |
Share proportionately in any new issues of stock of the same class |
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In a corporate form of business organization, legal capital is best defined as |
The par value of all capital stock issued. |
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Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that stockholders |
Bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. |
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Total stockholders' equity represents |
A claim against a portion of the total assets of an enterprise. |
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A primary source of stockholders' equity is |
Income retained by the corporation and contributions by stockholders. |
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Stockholders' equity is generally classified into two major catagories |
Earned capital and contributed capital |
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The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the |
Proportional or incremental method |
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When a corporation issued its capital stock in payment for services, the least appropriate basis for recording the transaction is the |
Par value of the shares issued |
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Direct costs incurred to sell stock such as underwriting costs should be accounted for as |
A reduction of additional paid-in capital |
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A "secret reserve" will be created if |
A capital expenditure is charged to expense |
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Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? |
Authorized shares |
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Stock that has a fixed per-share amount printed on each stock certificate is called |
Par value stock |
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What is not a legal restriction related to profit distributions by a corporation? |
The amount distributed in any one year can never exceed the net income reported for that year. |
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In January 2012, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2012, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares |
Decreased stockholders' equity |
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Treasury shares are |
Issued but not outstanding shares |
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When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? |
Treasury stock for the purchase price |
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Gains on sales of treasury stock (using the cost method) should be credited to |
Paid-in capital from treasury stock |
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Porter Corp. purchased its own par value stock on January 1, 2012 for $20,000 and debited treasury stock account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from |
Additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings. |
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How should a "gain" from the sale of treasury stock be reflected when using the cost method? |
As paid-in capital from treasury stock transactions |
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What best describes a possible result of treasury stock transactions by a corporation? |
May decrease but not increase retained earnings |
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What feature of preferred stock makes the security more like a debt than an equity investment? |
Redeemable |
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The cumulative feature of preferred stock |
Requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common stockholders. |
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According to the FASB, redeemable preferred stock should be |
Included as a liability |
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Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as |
A footnote |
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At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the |
Purchase of treasury stock |
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An entry is not made on the |
Date of record |
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Cash dividends are paid on the basis of the number of shares |
outstanding |
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What statement about property dividends is not true? |
The accounting for a property dividend should be based on the carrying value (book value) of the nonmonentary assets transferred. |
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Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2012, Houser distributed these shares of stock as a divided to its stockholders. This is an example of |
Property Dividend |
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A dividend which is a return to stockholders of a portion of their original investments is a |
Liquidating dividend |
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A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to |
A paid-in capital account |
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If management wishes to "capitalize" part of the earnings, it may issue a |
Stock dividend |
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Which dividends do not reduce stockholders' equity? |
Stock dividends |
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The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding |
Decreases retained earnings but does not change total stockholders' equity |
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Quirk corporation issued a 100% stock dividend of its common stock which has a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued? |
Par value |
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The issuer of a 5% common stock dividend to common stockholders preferably should transfer from retained earnings to contributed capital an amount equal to the |
Fair value of the shares issued |
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At the date of declaration of a small common stock dividend, the entry should not include |
A credit to Common Stock Dividend Payable |
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The balance in Common Stock Dividend Distributable should be reported as a(n) |
Addition to capital stock |
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A feature common to both stock splits and stock dividends is |
There is no effect on total stockholders' equity |
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What effect does the issuance of a 2 for 1 stock split have on Par Value per Share and Retained Earnings? |
Decrease par value per share and no effect on retained earnings |
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What disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements? |
Liquidation preferences |
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The rate of return on common stock equity is calculated by dividing |
Net income less preferred dividends by average common stockholders' equity |
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The payout ratio can be calculated by dividing |
Cash dividends by net income less preferred dividends |
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Younger Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The liquidation value of the preferred stock is equal to its par value. The book value per share of the common stock is unaffected by |
The payment of a previously declared cash dividend on the common stock |
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Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called |
Book value per share |
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Dividends are not paid on |
Treasury common stock |
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Noncumulative preferred dividends in arrears |
Are not paid or disclosed |
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How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position? |
Note disclosure |
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Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 if its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $520,000. How much of the proceeds would be allocated to common stock? |
10,000 x $25 = 200,000 = .45 15,000 x $25 = 3,00000 = .55 550,000 |
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Norton Company issues 4,000 shares of its $5 par value common stock having a fair value of $25 per share and 6,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $204,000. What amount of the proceeds should be allocated to the preferred stock? |
4,000 x 25 = 100,000 = .45 6,000 x 20 = 120,000 = .55 x 204,000 = 112,200 220,000 |
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Glavine Company issues 6000 share of its $15 par value common stock having a fair value of $25 per share and 9000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $312,000. The proceeds allocated to the common stock is: |
6000 x 25 = 150000 = .45 x 312000 = 140400 9000 x 20 = 180000 330,000 |
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Wheeler Company issued 5000 shares of its $5 par value common stock having a fair value of $25 per share and 7500 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $260,000. The proceeds allocated to the preferred stock is |
5000 x 25 = 125000 = .45 7500 x 20 = 150000 = .55 x 260000 = 143000 275,000 |