Chapter 11 Key terms and definitions Flashcards

1
Q

What is a corporation?

A

a business that is a separate legal entity under state and federal laws with owners called shareholder or stockholders.

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2
Q

What are Organizational Expenses?

A

Cost such as legal fees and promoter fees to bring a corporation into existence.

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3
Q

What is a proxy?

A

A legal document giving the stockholders agent the power to excersise the stockholders voting rights.

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4
Q

What is common stock?

A

Corporations basic ownership share; also called capital stock.

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5
Q

What are preemptive rights?

A

The stockholders right to maintain their proportionate interest in corporation when additional shares are issued.

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6
Q

What is Capital Stock?

A

General term referring to a corportations stock used in obtaining capital. (Owner Financing)

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7
Q

What is authorized stock?

A

The total amount of stock that a corportation charter allows it to issue.

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8
Q

What is market value per share?

A

The price of which a stock is bought or sold.

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9
Q

What is Par value stock?

A

Stock that is assigned at a par value by the corporate charter.

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10
Q

What is Par value?

A

Value assigned a share of stock by the corporate charter when the share is authorized.

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11
Q

What is minimum legal capital?

A

The amount of assets assigned by law that a stockholder must invest in a corporation; usually defined as par value of the stock, and is to protect creditors.

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12
Q

What is no par value stock?

A

Stock that has not been assigned a value per share by the corporate charter.

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13
Q

What is state value?

A

No par value stock assigned a stated value per share; this amount is recorded in the stock account when the stock is issued.

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14
Q

What is Stockholders Equity?

A

A corporations equity; shareholder equity, Corporate capital.

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15
Q

What is paid in capital?

A

The amount of cash and other assets the corporation recieves from its stockholders in exchange for its stock.

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16
Q

What is retained earnings?

A

Cumulative income less cumulative losses and dividends.

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17
Q

When does a premium on stock occur?

A

When a corporation sells its stock for more than par value.

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18
Q

What is paid in capital in excess of par value?

A

the amount recieved in issuance of stock that is in excess of par value.

19
Q

What is a discount on stock?

A

Difference between the par value on stock and its issue price when issued at a price below par value.

20
Q

What are Orgaization Expenses?

A

When a corporation gives shares of it’s stock to promoters in exchange for their services in organizing the corporation.

21
Q

What is the date of declaration?

A

The day the directors vote to pay a dividend.

22
Q

What is the date of record?

A

The date that directors specify for identifying stockholders to recieve dividends.

23
Q

What is date of payment?

A

The date directors pay out the dividends.

24
Q

What is a retained earnings deficit?

A

debit balance in the retained earnings account; it occurs when cumulative losses and dividends exceeds cumulative income.

25
Q

What is liquidating cash dividends?

A

distribution of assets that return part of the original investment to stockholders; deducted from contributed capital accounts.

26
Q

What is a stock dividend?

A

a corporations distribution of its own shares to its stockholders without the receipt of any payments.

27
Q

What is a small stock dividend?

A

stock dividend that is 25 percent or less of a companies previously outstanding shares.

28
Q

what is large stock dividend?

A

stock dividend that is more than 25 percent of a corporations previously outstanding shares.

29
Q

What is a stock split?

A

occurs when a corporation call in a stock and replace each share with more than one addition share; this increase both the market value per share and the par or stated value per share.

30
Q

what is preferred stock?

A

Stock with priority status over common stock in one or more ways; such as paying dividends and distributing assets.

31
Q

what is cumulative preferred stock?

A

preferred stock on which undeclared dividends accumulate until paid; common stockholders cannot recieve dividends until cumulative dividends are paid.

32
Q

what are dividends in arrears?

A

Unpaid dividends on cumulative preferred stock; must be paid before any regular dividends on preferred stock or common stock.

33
Q

What is noncumulative preferred stock?

A

preferred stock in which the right to recieve dividends is lost for any period when dividends are not declared.

34
Q

What is non participating preferred stock?

A

Preferred stock in which dividends are limited to a maximum amount each year.

35
Q

What is participating preferred stock?

A

Preferred stock that shares with common stockholders any dividends paid in excess of the percent stated on preferred stock.

36
Q

What is convertible preferred stock?

A

stock with an option to exchange it for common stock with a specified rate.

37
Q

What is callable preferred stock?

A

stock that the issuing corportation, at its option may retire by paying the call price plus any dividends in arrears.

38
Q

What is call price?

A

The amount that must be paid to call and retire a callable preferred stock or callable bond.

39
Q

what is financial leverage?

A

earning a higher return on equity by paying dividends on preferred stock or interest on debt on a rate lower than the return earned with the assets of issuing preferred stock or debt; also called trading on equity.

40
Q

What is treasury stock?

A

a corportations own stock that it reacquired and still holds.

41
Q

What are restricted retained earnings?

A

retained that are not available for dividends because of legal or contractual limitations.

42
Q

What are appropriated retained earnings?

A

retained earnings not available for dividends because of legal or contractual limitations.

43
Q

Prior period adjustments?

A

Prior period adjustmentsCorrection of an error in a prior year that is reported in the statement of retained earnings (or statement of stockholders’ equity) net of any income tax effects. are corrections of material errors in prior period financial statements. These errors include arithmetic mistakes, unacceptable accounting, and missed facts. Prior period adjustments are reported in the statement of retained earnings (or the statement of stockholders’ equity), net of any income tax effects.