Inted acct 2
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| Contributed Captial | consists of par value of shares and the amount in excess of this value (additional paid in capital) added together.
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| Preemptive right | to share proportionately in any new issues of stock of the same class.
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| The residual interest in a corporation belongs to the | common stockholders
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| Total Stockholders equity is made up of | Common stock, paid in capital in excess of par ( common, preferred & Treasury stock) Retained Earnings, Preferred Stock
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| Treasury Common Stock (at cost) | Is subtracted from Stockholders equity
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| Residual owners | Common stockholders of a business. 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 the company
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| The issuance of no-par stock has no effect on | Additional paid-in capital.
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| Treasury Stock ( Treasury Shares) | is a contra account recorded in the shareholder's equity section of the balance sheet , it reduces shareholder's equity by the amount paid for the stock
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| Under the cost method when treasury stock is sold for more than its cost, the excess is credited to | Paid -in Capital from Treasury Stock
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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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| Which of the following best describes a possible result of treasury stock transactions by a corporation? | May decrease but not increase retained earnings.
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| The most common type of preferred stock is | Cumulative preferred stock
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| A preference as to dividends merely assures that the corporation must pay the stated dividend rate or amount | applicable to the preferred stock before paying any dividends on the common stock.
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| Which of the following features of preferred stock makes the security more like debt than an equity instrument | Redeemable
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| The payment of a dividend does not have to be in the | same period as it was declared.
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| Cash dividends are paid on the basis of the number of shares | Outstanding
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| The statement of changes in equity has columns for each of the following | Retained earnings, Share capital, Unrealized holding gain/ loss
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| The Revaluation Surplus of IFRS is | different than U.S. GAAP in that it allows the increase in valuation
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| The accounting for treasury stock retirements under IFRS requires | a charge for the excess to paid-in capital, depending on the original transaction related to the issuance of the stock.
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| The Revaluation Surplus of IFRS is | different than U.S. GAAP in that it allows the increase in valuation.
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| At what amount should retained earnings be capitalized for the additional shares issued? | Retained earnings is reduced by an amount equal to the number of shares issued times the par value per share.
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| The statement of stockholders' equity is frequently presented in the following basic format. | 1. Balance at the beginning of the period.
2. Additions.
3. Deductions.
4. Balance at the end of the period.
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| columnar format for the presentation of changes in stockholders' equity items in published annual reports is gaining in popularity. | true
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| The book value per share is based on | common shares outstanding.
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| Which of the following country systems of finance have relied more heavily on debt financing, interlocking stock ownership, banker/directors, and worker/shareholder rights? | Japan and Germany
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| 3 special characteristics of the corporate fore that effect accounting | 1. Influence of state corporate law. 2. use of capital stock or share system 3. Development of a variety of ownership interests
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| In the absence of restrictive provisions each share carries the following rights | 1. To share proportionately in profits and loses
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| In the absence of restrictive provisions each share carries the following rights | 2. To share proportionately in management ( right to vote for directors)
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| In the absence of restrictive provisions each share carries the following rights | 3. To share proportionately in corporate assets upon liquidation.
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| In the absence of restrictive provisions each share carries the following rights | 4. To share proportionately in any new issues of stock of the same class - call the preemptive right.
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| Preemptive right | right protects an existing stockholder from involuntary dilution of ownership interest.
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| Preferred stock always sacrifices some of the | inherent rights of common stock ownership.
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| Examples of preferred stock sacrifice to obtain right to rec assured dividend usually at a stated rate before common stockholders | may sacrifice right of voice in management or right to share in profits beyond stated rate.
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| Three categories normally appear as part of Stockholder's equity | 1. Capital stock, 2. Additional paid in capital. 3. Retained earnings.
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| Retained earnings | represent earned capital of the company. Profits added from year to year,
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| Two primary sources of Equity | Contributed capital and retained earnings
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| Disadvantage of no par stocks is that some states levy a high tax on these issues and | some states the total issue price for no par stock may be considered legal capital, which could reduce flexibility in pay dividends.
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| Benefits of no-par stock | Avoids contingent liability and avoids confusion over recording par value versus fair market value
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| Two methods of allocating proceeds when stock issued with other securities | Proportional method and Incremental method
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| Stocks issued in Non cash Transactions should record stock for services or property other than cash at the | Fair value of the stock issued or fair value of the noncash consideration received whichever is more clearly determinable.
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| Characteristics of Preferred Stock | Preference as to dividends, preference to assets if liquidation, convertible into common stock, callable at option of corporation & non voting.
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| Cost of Issuing Stock (direct cost) includes | underwriting costs, accounting & legal fees, printing costs and taxes
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| Cost of Issuing Stock (direct cost) | should be reported as a reduction of the amounts paid in (Paid-in Capital in Excess of Par).
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| Corporations may attach whatever preferences or restrictions | as long as it does not violate its state incorporation law..
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| Features of Preferred Stock | Cumulative, participating, convertible, callable, and redeemable
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| Reasons corps Re-acquisition of shares(Corp purchases their outstanding stock | Provide tax-efficient distributions of excess cash to stockholders
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| Reasons corps Re-acquisition of shares(Corp purchases their outstanding stock | Increase earnings per share and return on equity
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| Reasons corps Re-acquisition of shares(Corp purchases their outstanding stock | Provide stock for employee stock compensation contracts or to meet potential merger needs.
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| Reasons corps Re-acquisition of shares(Corp purchases their outstanding stock | Thwart takeover attempts or to reduce the number of stockholders
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| Reasons corps Re-acquisition of shares(Corp purchases their outstanding stock | make a market in the stock
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| Treasury stock | Stock re- purchased and held to sell again and is not considered an asset. It is essential the same as unissued capital stock.
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| To re-purchase stock (treasury) two methods are used | Cost Method and par (stated) value method
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| Cost Method | results in debiting the treasury Stock account for the re-acquisition cost and in reporting this account as a deduction from the total paid-in capital & retained earnings on the balance sheet.
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| Par (stated) value method | records all transactions in treasury shares at their par value and reports the treasury stock as a deduction from capital stock only
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| Under incremental method the market value of the securities is used as a basis for those classes that are known | The remainder of the lump sum is allocated to the class for which the market value is not known.
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| A corp cannot show a gain or loss dealing with its own stock | Treasury stock
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| If treasury stock is reissued at a price in excess of the acquisition cost | excess is credited to an account titled paid in Capital from Treasury Stock
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| Preferred dividends in arrears are not liabilities till declared by board of directors & | Any dividends in arrears on preferred stock should be disclosed in a footnote to the financial statments
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| participating dividends | a feature of preferred stock enabling the stockholder to share ratably with common stockholders in any dividends beyond the rate specified on the preferred stock.
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| property dividend | when a corporation distributes a dividend of an asset other than cash to stockholders
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| liquidating dividend | dividend not based on retained earnings implying that stockholder share are receiving a return of their investment, rather than profits.
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| One of the major distinctions between a stock split and a stock dividend is the fact that a stock split alters the par or stated value of stock issued involved | while stock dividend does not affect par or stated value.
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| From accounting standpoint no entry is recorded for a stock split | true
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| Rate of return on common stock equity is computed by dividing net income- less preferred | dividends/ by average common stockholders equity.
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| By law capital is considered the portion of stockholders equity | that is required by statue to be retained in the business for the protection of creditors. usually legal capital is the par value of all capital stock issued
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