ch 11 sb

• A Blank______ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held.corporation
• Identify the advantages of the corporate form of business.

  • Continuous life
  • Limited liability of stockholders
  • Ease of capital accumulation
• Two of the biggest disadvantages of the corporate form of business are government regulation and corporate

  • Government regulation
  • Corporate taxation

   
• A corporation is created by obtaining a charter from:the state government
• Identify which of the following is not generally a right of common stockholders.Manage operations
• Corporations can be separated into two types. A (privately/publicly)  held corporation does not offer its stock for public sale and usually has few stockholders. A (privately/publicly)  held corporation offers its stock for public sale and can have thousands of stockholders.

  • Field 1: privately, closely, or private
  • Field 2: publicly or public
• Authorized stock is the number of shares that a corporation's charter allows it to sell. The number of these shares usually exceeds the number of shares issued (and outstanding), often by a large amount.
• Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency. True or False?


  True
• The Blank______ value per share is the price at which a stock is bought and sold. market
• Darby, Inc. has 25,000 shares of stock issued and outstanding. All the shares of stock have the same rights and characteristics; therefore, the stock is called common stock.
• A charter application usually must be signed by the prospective stockholders called incorporaters orpromoters . Then, it is filed with the appropriate state official.
• Jordan Inc.'s charter states that there are 50,000 shares of stock authorized with a par value of $5 per share. This typically means that investors must pay a (minimum/maximum)  minimumof $5 per share to invest in the corporation.
• Stockholders have the right to vote at stockholders' meetings.
• Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries?

  • Credit to Common Stock, $1 par for $200.
  • Debit to Cash for $200.
• ___authorized___ stock is the number of shares that a corporation's charter allows it to sell.
• Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a credit ,  to Common Stock, for 500
• The market value per share is the price at which stock is bought anPar valued sold. Which of the following factors does not influence market value?
• Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share. Vanya sells 50 shares of stock at its initial offering for $10 per share. The journal entry to record this transaction will include which of the following entries?

  • Credit to Paid-In Capital, in Excess of Stated Value for $450.
  • Debit to Cash for $500.
  • Credit to Common Stock for $50.
• When all authorized shares of stock have the same rights and characteristics, the stock is called Blank___common___ stock.
• Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200 shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to record this transaction in the books of Damian, Inc., will include a credit to Blank______ in the amount of Blank______. Paid-in Capital, in Excess of Par; $8,000
• The ___par___ value of stock is an amount assigned per share by the corporation in its charter. In many states, this amount establishes the minimum legal capital, which refers to the least amount that the buyers of stock must contribute or be subject to paying at future dates.
• The board of directors authorizes a cash dividend  or distribution of cash to its investors.
• Niren, Inc.'s charter authorizes 1,000,000 shares of stock at a par value of $1 per share. Niren sells 100 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include a credit to Common Stock, $1 par for $100
• The board of directors of Visor, Inc. authorize a Blank___stock dividend___, a distribution of additional shares of the corporation's own stock, to existing shareholders.
• Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) Blank___credit___ to Common Stock for Blank___500___.
• Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a credit  to Common Stock, $500
• Carefree, Inc. has 20,000 shares issued and outstanding. On August 1, the board authorizes a 20% stock dividend. This is considered a small stock dividend.
• John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts?

  • Paid-in Capital in Excess of Par Value
  • Common Stock
• A stock dividend that is greater than 25% of the previously outstanding shares of stock is considered to be a (small/large) largeField 1Field 1 large , Correct Unavailable stock dividend.
• A Blank___cash dividend___ is the distribution of cash to its owners. This is determined by the board of directors.
• Mario, Inc. declares a 2-for-1 stock splitField 1Field 1 split , Correct Unavailable. This means that Mario will "call in" its outstanding shares and issue two shares in exchange for each old share of stock.
• A Blank___stock___ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.
• ___preferred stock___ has/have special rights that give it priority over other types of stock in one or more areas.
• On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) creditField 1Field 1 credit , Correct Unavailable to the preferred stock account in the amount of $100
• A small stock dividend is a distribution of Blank___25___% or less of previously outstanding shares.
• On January 1, Lang, Inc. has 100,000 shares of stock issued and outstanding. The board of directors of Lang wants to authorize a large stock dividend. This means that they must authorize a stock dividend of at least Blank___25,001___ shares of stock.

  Reason: 

  A large stock dividend is a distribution of 25% of previously issued outstanding shares.
• Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $15,000 dividend, the payments to preferred shareholders will total Blank___$2,500___. Reason: 

  10,000 shares x $5 x .05 = $2,500.
• A stock Blank___split___ is the distribution of additional shares to stockholders according to their percent ownership. When this occurs, the corporation "calls in" its outstanding shares and issues more than one new share in exchange for each old share.
• Stock that typically includes preference for receiving dividends and for distribution of corporate assets during a liquidation is called (common/preferred)preferred _ stock.
• Preferred stock can be issued to raise money without giving up control.