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Flashcards in chapter 11 Deck (32):
1

Par value

stated value = no par = legal capital

-does not reflect current market value

2

Market Price =

MP = Issue Price = FMV = fair market value = cash received.

3

Authorized stock

(must receive permission to issue these shares from the Secretary of State where the business is incorporated)

4

Issued stock

sold to all investors

5

Outstanding Stock

has been issued and is in the hands of stockholders outside the corporation itself

6

Treasury Stock

stock that has been previously issued and outstanding but now held by the corporation itself

7

5. Corporations may resell (reissue) its Treasury Stock

then it becomes issued and outstanding again.

8

Common Stock
(features)

vote for the board of directors and auditors, preemptive rights, residual assets

9

Rights of preferred stock

Non-voting, fixed dividends, liquidation preference to assets before common

10

Dividends are not an

expense

11

Points for Dividends

For common stockholders -- are at discretion of board of directors but in practice are fairly consistent.
2. Must have available cash and positive retained earnings.
3. Cash dividends -- to outstanding stockholders ONLY. (Outstanding stock = issued

12

Dividends declared does what

reduces Retained earnings

13

Dividends paid

reduces cash

14

● Treasury Stock is a CONTRA

Stockholder's equity account

15

● Issued shares =

outstanding shares + shares in Treasury

16

● Treasury Stock does not

get dividends, it does not get to vote for board of directors or other issues.

17

● Treasury stock ≠

unissued stock.

18

Unissued stock =

Authorized shares – issued shares

19

New Financing Activities

• Issue Stock
• Purchase of treasury stock or sell Treasury Stock
• Payment of cash dividends

20

statement of retained earnings

Rule: Dividends declared/
Shares Outstanding

21

statement of cash flow

Rule: Dividends paid/
Shares outstanding

22

Overall Entry for This Section

dr: Cash (issue price= market price) step #1
cr: Common stock (PAR) step #2
cr: Additional Paid in capital in excess of par (APIC) Step #3
(difference of MP-par)

23

Date of Declaration Entry

Dr: Retained Earnings or Dividends Declared(XSE)
Cr: Dividends Payable

24

Payment Date Entry

Dr: Dividends Payable
Cr: Cash

25

Dicuss Cumulative vs Non-Cumulative?

check handout

26

Dividend Arrears are not a liability

liability

27

Retained Earnings are

the accumulation of all past net income minus all past dividends declared. It is NOT a pile of money. It represents one of two major sources of funding of assets.

28

Book value ≠

market price

29

Net assets =

net worth = BV = Stockholders' Equity = assets minus liabilities.

30

Dividends are not an

expense and they do not accrue

31

What balance sheet has?

-par value per share
-# of shares authorized
-# shares issued
-# shares outstanding

32

Why is treasury stock brought back?

-bonuses and stock compensation plans
-feel that its under priced
-increase e.p.s.