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  1. Authorized stock
  2. Marine Corporation issues 10,000 shares of 10 percent, $100 par value noncumulative preferred stock for $110 per share at the beginning of 2011. It did not pay any dividends in 2011 and 2012. In December 2013, it declares total dividends of $250,000. The company issued common stock in 2009. How much will the common stockholders of Marine Corporation receive as dividends for the year?

    $150,000
    $250,000
    $50,000
    $100,000
  3. Mutual agency
  4. Privately held corporation
  5. Stock split
  6. The market value of a stock is determined by the par value of the common stock.

    True
    False
  7. Declaration date
  8. Model Business Corporation Act
  9. Marina Inc repurchases 1 million shares of its own $1 par value common stock at $70 per share. It later reissues the 1 million shares of treasury stock for $75. We record the $5 difference per share as a what?

    Gain in the income statement
    Credit to Additional Paid-in Capital
  10. What is a preemptive right?

    Right to vote on matters that come before the stockholders, including the election of corporate directors

    Right to share in profits when the company declares dividends

    Right that allows a stockholder to maintain his or her percentage share of ownership when new shares are issued.

    Right to share in the distribution of assets if the company is liquidated
  11. Almond Corporation repurchases 10,000 shares of its own $1 par value common stock at $10 per share. It will record this transaction with a debit to...
  12. If losses exceed income since the company began, Retained Earnings will have a credit balance.

    True
    False
  13. Value stocks
  14. Dreams, Inc., issues 10,000 shares of $0.01 par value common stock at $10 per share. What is the amount of Additional Paid-In Capital recorded by the company?

    $99,900
    $100
    $99,000
    $1,000
  15. Dana Corporation issues 1,000 shares of $1 stated value common stock at $20 per share. What is the amount of Common Stock recorded by the company?

    $20,000
    $19,000
    $1,000
    $100
  16. What presents the balance of each equity account at a point in time?

    Stockholders Equity Section of the balance sheet
    Statement of Stockholders Equity
  17. Dividends in arrears
  18. Limited liability
  19. Because they have voting rights, common stockholders receive priority over preferred stockholders in the distribution of assets in the event the corporation is dissolved.

    True
    False
  20. Stock dividends
  21. Convertible
  22. No-par value stock
  23. Innovative Media issues 1,000 shares of 8 percent, $50 par value preferred stock for $60 per share. Which of the following will be recorded at the time of the issue?

    a credit to Additional Paid-In Capital for $10,000
    a debit to Cash for $50,000
    a credit to Preferred Stock for $10,000
    a credit to Preferred Stock for $60,000
  24. Articles of incorporation
  25. Retained earnings
  26. Redeemable
  27. Dividends
  28. The Stock Dividends account is a temporary stockholders' equity account that is closed into ______.

    Retained Earnings
    Common Stock
    Dividends
    Net Income
  29. when a company uses a portion of the company's earnings to buy back treasury shares. This action does what to stockholders' equity?

    increases or decreases
  30. Return on equity
  31. Shares actually sold, which includes treasury stock
  32. Venture capital firms
  33. What are the primary Disadvantages of a corporate form of business?
  34. Initial public offering
  35. The market value of Kennedy Corporation's common stock is $100 per share when it declares a 20 percent dividend on its 10,000 shares outstanding of $1 par value common stock. The entry to record this small stock dividend involves a _____.

    debit to Stock Dividends for $2,000
    credit to Common Stock for $200,000
    credit to Additional Paid-In Capital for $198,000
    debit to Cash for $200,000
  36. Return on the market value of equity
  37. _____ means that each individual partner in a partnership has the power to bind the business to a contract.

    Mutual agency
    Preemptive right
    Moral hazard
    Seasoned
  38. Preferred stock
  39. Delta Corporation repurchases 10,000 shares of its own $0.01 par value common stock at $10 per share. It later reissues the 10,000 shares of treasury stock for $12. The entry to record this transaction will involve what to Additional Paid-In Capital?

    Debit
    Credit
  40. Price-earnings ratio
  41. Earnings per share
  42. Par value
  43. Shares held by investors
  44. What are the primary advantages of a corporate form of business?
  45. S corporation
  46. Payment date
  47. Growth stocks
  48. Total number of shares available to sell
  49. On the date of declaration of the dividend, we _____.

    debit Dividends
    debit Dividends Payable
    credit Cash
    credit Retained Earnings
  50. All of the following accounts are directly or indirectly affected by a large stock dividend except _____.

    Retained Earnings
    Additional Paid-In Capital
    Common Stock
    Stock Dividends
  51. Outstanding stock
  52. Publicly held corporation
  53. An investor is analyzing the relative risk of different investment options in a company. Which of the following usually poses the highest amount of risk?

    Preferred stock
    Bonds
    Common stock
  54. Treasury stock
  55. Issued stock
  56. Statement of stockholders' equity
  57. Record date
  58. Additional paid-in capital
  59. Double taxation
  60. Lego, Inc., issues 10,000 shares of 8 percent, $100 par value cumulative preferred stock for $110 per share at the beginning of 2011. It did not pay any dividends in 2011. In December 2012, it declares total dividends of $200,000. The company issued common stock in 2008. How much will the preferred stockholders of Lego receive as dividends?

    $200,000
    $160,000
    $80,000
    $40,000
  61. Which of the following dates associated with dividends do not require an entry to be recorded?

    Payment date
    Record date
    Declaration date
  62. If no-par value stock is issued, the corporation debits Cash and credits Common Stock.

    True
    False
  63. Why do most companies report a 100 percent stock distribution as a stock split to be recorded as a stock dividend?

    to avoid changing the par value per share
    to increase stock prices
    to boost earnings per share and other key ratios
    to avoid recording a transaction
  64. Organization chart
  65. Paid-in capital
  66. Stated value
  67. Total assets, total liabilities, and total stockholders' equity do not change as a result of a stock dividend, whether large or small.

    True
    False
  68. Cumulative
  69. What account increases from the sale of treasury stock for more than its original cost?

    Common Stock
    Additional paid-in capital
  70. What is the net effect of a dividend declaration and payment?

    reduction in both liabilities and assets
    reduction in both stockholders' equity and assets
    increase in both liabilities and stockholders' equity
    increase in liabilities and decrease in stockholders' equity
  71. Accumulated deficit
  72. The statement of stockholders' equity summarizes the changes in the balance in each stockholders' equity account ..

    over a period of time
    at a point in time
  73. When a corporation repurchases its own stock, it debits Treasury Stock at ...

    cost
    par value
  74. Angel investors
  75. Companies usually rely on angel investors and venture capital firms following an initial public offering.

    True
    False
  1. a The date of the actual cash distribution of dividends
  2. b Describes the nature of the firm's business activities, the shares to be issued, and the composition of the initial board of directors
  3. c False, Preferred stockholders receive preference over common stockholders in the distribution of assets in the event the corporation is dissolved.
  4. d A debit balance in retained earnings
  5. e Provide additional financing, often in the millions, for a percentage ownership in the company
  6. f Net income divided by average stockholders' equity. Measures the income generated per dollar of equity
  7. g Credit

    By repurchasing shares of its own stock for $10 per share and reselling them for $12 per share, Delta experienced an increase in additional paid-in capital. This is reflected in the entry as a credit to the Additional Paid-in Capital account.
  8. h The first time a corporation issues stock to the public
  9. i Unpaid dividends on cumulative preferred stock
  10. j Measures the net income earned per share on common stock
  11. k Shares can be returned to the corporation at a fixed price
  12. l Additional Paid-In Capital

    We account for a large stock dividend with a debit to Stock Dividends and a credit to Common Stock. Stock Dividends is a temporary stockholders' equity account that is closed into Retained Earnings.
  13. m Right that allows a stockholder to maintain his or her percentage share of ownership when new shares are issued.
  14. n True, If no-par value stock is issued, the corporation debits Cash and credits Common Stock.
  15. o Distributions by a corporation to its stockholders
  16. p Net income divided by the market value of equity
  17. q Stocks that tend to have higher price-earnings ratios and are expected to have a higher future earnings
  18. r True
  19. s Serves as a guide to states in the development of their corporate statutes
  20. t Shares receive priority for future dividends, if dividends are not paid in a given year
  21. u Decreases

    Think of how treasury stock is represented in the stockholders' equity section of the balance sheet.
  22. v The portion of the cash proceeds above par value
  23. w The amount stockholders have invested in the company
  24. x Authorized Stock
  25. y Summarizes the changes in the balance in each stockholders' equity account over a period of time
  26. z False, If losses exceed income since the company began, Retained Earnings will have a debit balance.
  27. aa Retained Earnings
  28. ab The number of shares sold to investors. Includes treasury shares
  29. ac Common stock has the highest amount of risk, followed by preferred stock, and finally bonds.
  30. ad A corporation pays income taxes on its earnings, and when dividends are distributed to stockholders, the stockholders pay taxes a second time on the corporate dividends they receive.
  31. ae debit Dividends

    The declaration of a cash dividend creates a binding legal obligation for the company declaring the dividend. On that date, we increase Dividends, a temporary account that is closed into Retained Earnings at the end of each period, and increase the liability account, Dividends Payable.
  32. af Stock with preference over common stock in the payment of dividends and the distribution of assets
  33. ag reduction in both stockholders' equity and assets

    The net effect is a reduction in both retained earnings (stockholders' equity) and cash (asset).
  34. ah The legal capital assigned per share to no-par stock
  35. ai A corporation's own stock that it has reacquired
  36. aj Shares can be exchanged for common stock
  37. ak Allows investment by the general public and is regulated by the Securities and Exchange Commission
  38. al Credit to Additional Paid-in Capital

    Note that this is not the sale of an investment in another company.
  39. am Stockholders in a corporation can lose no more than the amount they invested in the company
  40. an Wealthy individuals in the business community willing to risk investment funds on a promising business venture
  41. ao The Additional Paid-in Capital account increases from the sale of treasury stock for more than its original cost.
  42. ap Allows a company to enjoy limited liability as a corporation, but tax treatment as a partnership
  43. aq Treasury stock, When a corporation repurchases its own stock, it debits Treasury Stock
  44. ar credit to Additional Paid-In Capital for $198,000

    The entry involves a debit Stock Dividends for $200,000, a credit to Common Stock for $2,000, and a credit to Additional Paid-In Capital for the $198,000 difference.
  45. as 1000, Note that stated value is treated in the same manner as par value. The company credits the Common Stock account for stated value.
  46. at Additional shares of a company's own stock given to stockholders
  47. au 150000, Note that the preferred stock is noncumulative. So, preferred stockholders receive only their annual share of dividends. The remaining amount will be distributed to common stockholders.
  48. av Record Date

    No entry is required on the record date. This is the specific date on which the company will determine the registered owners of stock and therefore who will receive the dividend.
  49. aw The total number of shares available to sell, stated in the company's articles of incorporation
  50. ax Lack of mutual agency
    Limited Liability
    Ability to raise capital
  51. ay The number of shares held by investors (excludes treasury shares)
  52. az Issued Stock
  53. ba to avoid changing the par value per share

    To avoid changing the par value per share, most companies report a 100 percent stock distribution as a stock split to be recorded as a stock dividend.
  54. bb Individual partners each have power to bing the partnership to a contract
  55. bc The day on which the board of directors declares the cash dividend to be paid
  56. bd Stocks that tend to have lower price-earnings ratios and are priced low in relation to current earnings
  57. be Represents all net income, less all dividends, since the company began
  58. bf We record treasury stock at its cost
  59. bg The legal capital assigned per share of stock
  60. bh The stockholders' equity section of the balance sheet shows the balance in each equity account at a point in time.
  61. bi The stock price divided by earnings per share so that both stock price and earnings are expressed on a per share basis
  62. bj Double Taxation
    Paperwork
  63. bk Traces the line of authority for a typical corporation
  64. bl False, Par value has no relationship to the market value of the common stock.
  65. bm Outstanding Stock
  66. bn 160000, Note that the preferred stock is cumulative.
  67. bo 99900, We credit Additional Paid-In Capital for the portion of the cash proceeds above par value
  68. bp False. IPO is usually the last stage of equity financing. Dividens have to exceed 20 million first
  69. bq A specific date on which the company will determine the registered owners of stock and, therefore, who will receive the dividend
  70. br Mutual Agency
  71. bs over a period of time
  72. bt A large stock dividend that includes a reduction in the par or stated value per share
  73. bu Does not allow investment by the general public and normally has fewer stockholders
  74. bv a credit to Additional Paid-In Capital for $10,000

    Note that Preferred Stock is credited for par value, and the difference between this and cash proceeds is credited to Additional Paid-In Capital.
  75. bw Common stock that has not been assigned a par value