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Accounting 101 > Contributed Capital > Flashcards

Contributed Capital Flashcards

1
Q

Stock repurchased later by the company after it is originally sold is called…

A

treasury stock

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2
Q

The primary ownership unit in a company is called…

A

common stock

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3
Q

The maximum amount of shares that a corporation can issue is called…

A

authorized shares

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4
Q

True or false: the number of authorized shares can be increased by a shareholder vote.

A

true

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5
Q

The number of authorized shares is established in a document called the…

A

articles of incorporation

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6
Q

This is the equation to calculate the number of authorized shares.

A

authorized shares =
issued shares + unissued shares

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7
Q

The amount of shares issued to shareholders is called the…

A

issued shares

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8
Q

This is the amount of shares that are owned outside of the company (not bought back)…

A

outstanding shares

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9
Q

This is the equation for calculating the number of outstanding shares.

A

outstanding shares =
issued shares - treasury stock

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10
Q

This is the equation for calculating the number of issued shares.

A

issued shares =
outstanding + treasury

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11
Q

What is a call feature?

A

it provides the issuer the right to repurchase preferred shares at a specified price

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12
Q

What is a conversion feature?

A

It allows preferred shareholders to convert their shares into common shares.

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13
Q

What is a participation feature?

A

It allows preferred shareholders to share equally with common shareholders in dividends.

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14
Q

This type of preference for preferred stockholders states that preferred shareholders can receive dividends before common shareholders.

A

dividend preference

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15
Q

This type of preference for preferred stockholders states that, if a company fails, assets sold in liquidation go first to pay debtors, next to preferred shareholders and finally to common stockholders.

A

liquidation preference

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16
Q

The cumulative profit that has been retained by the company is also known as…

A

earned capital or retained earnings

17
Q

Which type(s) of dividends reduce stockholders’ equity?

A

cash and property dividends

18
Q

Which type(s) of dividends do NOT reduce stockholders’ equity?

A

stock dividends

19
Q

What does it mean when dividends are “cumulative?”

A

The unpaid prior years’ dividends are paid to preferred shareholders before any payment for the current year.

20
Q

The unpaid prior years’ dividends are also called…

A

Dividends in Arrears

21
Q

When you record a stock dividend, which accounts are affected and how?

A

retained earnings decreases,
contributed capital increases

22
Q

How do your retained earnings decrease in the case of a SMALL stock dividend?

A

they decrease by the market value of stock distributed

23
Q

How do your retained earnings decrease in the case of a LARGE stock dividend?

A

they decrease by the par value of stock distributed

24
Q

What range is considered a SMALL stock dividend?

A

When the company has majority stake in itself, outstanding less than 20-25%

25
Q

What range is considered a LARGE stock dividend?

A

When outside stakeholders hold a lot of stake in the company, greater than 20-25%

26
Q

Common stock is typically purchased by…

A

your average joe

27
Q

Preferred stock is typically purchased by…

A

higher-ups, executives

28
Q

True or false: common shareholders have voting rights for the company.

A

true!

29
Q

True or false: preferred shareholders get voting right for the company.

A

false!

30
Q

What accounts are impacted by the issuance of stock? (journal entry)

A

Dr. Cash
Cr. Common Stock
Cr. Addtl. Paid-In Capital

31
Q

What accounts are impacted by the repurchase of stock? (journal entry)

A

Dr. Treasury Stock
Cr. Cash

32
Q

What accounts are impacted by the resale of treasury stock? (journal entry)

A

Dr. Cash (# of shares x selling price)
Cr. Treasury Stock
(# of shares x OG market price)
Cr. Addtl. Paid-In Capital
(excess to balance out the sheet)

Accounting 101 (15 decks)

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