ACCT 1209 Chapter Notes - Chapter 11: Kroger, Dividend, Treasury Stock

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redmanatee539

16 Dec 2016

School

Northeastern University

Department

Accounting

Course

ACCT 1209

Professor

Ganesh Krishnamoorthy

For unlimited access to Textbook Notes, a Class+ subscription is required.

Chapter 11: Reporting and Interpreting Owners’ Equity

Advantages of a corporation

• Simple to become an owner

• Easy to transfer ownership

• Provides limited

liability

• separate legal entity

o Own assets.

o Incur liabilities.

o Sue and be sued.

o Enter into contracts.

Authorized, Issued, and Outstanding Shares

Authorized shares: maximum number of shares a company can see

Issued: shares that are sold for the public

Outstanding shares: are issued shares that are owned by stockholders.

Treasury shares: are issued shares that have been reacquired by the corporation.

Authorized shares = issued shares + unissued shares

Issues shares = Outstanding + Treasury Stock

EPS = Net Income – preferred stock

Average Number of Shares Outstanding for the Period

• a measure of the company’s ability to produce income for each common share outstanding

Stock Issued for Employee Compensation

Stock options: allow employees to purchase stock from the corporation at a predetermined, fixed price.

Initial Sale of Stock

Kroger issued 100,000 shares of $1 par value common stock for $20 per share.

Repurchase of Stock: Treasury Stock

• A corporation records treasury stock at cost. Treasury stock has no voting or dividend rights.

• Treasury stock is not an asset. It is a contra equity account.

Kroger reacquired 100,000 shares of its common stock at $20 per share.

Reissuance of Treasury Stock

Kroger reissued 10,000 shares of the treasury stock at $30 per share.

Par Value ≠

Market Value

Stockholder's

Equity

Contributed

Capital

Common

stock, par

value

Nominal

Value

Legal Capital

Capital in

excess of par

Retained

Earnings

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Document Summary

Advantages of a corporation: simple to become an owner, easy to transfer ownership, provides limited liability separate legal entity, own assets, sue and be sued, enter into contracts. Authorized shares: maximum number of shares a company can see. Issued: shares that are sold for the public. Outstanding shares: are issued shares that are owned by stockholders. Treasury shares: are issued shares that have been reacquired by the corporation. Authorized shares = issued shares + unissued shares. Average number of shares outstanding for the period: a measure of the company"s ability to produce income for each common share outstanding. Stock options: allow employees to purchase stock from the corporation at a predetermined, fixed price. Kroger issued 100,000 shares of par value common stock for per share. Repurchase of stock: treasury stock: a corporation records treasury stock at cost. Treasury stock has no voting or dividend rights: treasury stock is not an asset.

Related Questions

Match the items below by entering the appropriate answer letter choice from the column provided on the right.

	1.Net income retained in the corporation.
	2. Creditors cannot go after stockholderâs personal assets to satisfy their claims.
	3. Retained earnings currently unavailable for dividends.
	4. A corporationâs own stock that has been reacquired by the corporation.
	5. Responsible to stockholders for corporate activity.
	6. The amount assigned to each share of stock in the corporate charter.
.	7. The date the board of directors formally declares the dividend and announces it to stockholders.
	8. A debit balance in retained earnings.
	9. Capital contributed by stockholders.
	10. The death of a stockholder or employee does not affect the going concern of the corporation.
	11. The company determines ownership of the outstanding shares for dividend purposes.
	12. Unit of ownership in a corporation.
-	13. This type of dividend for the stockholder results in more shares of stock, but no change in ownership interest.
	14. The issuance of additional shares of stock to stockholders accompanied by a reduction in the par or stated value per share. This stock transaction does not require an accounting entry.
	15. The acts of the owners (stockholders) do not bind the corporation.

A.	Par value
B.	Record date
C.	Retained Earnings
D.	Indefinite life
E.	Treasury stock
F.	Stock split
G.	Declaration date
H.	Retained Earnings restrictions
I.	Stock dividend
J.	Capital stock
K.	Deficit
L.	Paid-in capital
M.	Cash dividend
N.	Board of directors
O.	Separate legal entity
P.	Limited liability

lilachorse885

Match the items below by selecting the appropriate number in thespace provided.

Net income retained in the corporation.
The amount that must be retained in the business for theprotection of creditors.
Preferred stockholders have a right to receive current andunpaid prior-year dividends before common stockholders receive anydividends.
Creditors only have corporate assets to satisfy theirclaims.
Responsible to stockholders for corporate activity.
The amount assigned to each share of stock in the corporatecharter.
Unit of ownership in a corporation.
Enables stockholders to maintain their same percentageownership when new shares are issued.
Corporation's own stock that has been reacquired by thecorporation but not retired.
Total amount paid-in on capital stock.

1.	Limited liability
2.	Capital stock
3.	Board of directors
4.	Paid-in capital
5.	Retained earnings
6.	Preemptive right
7.	Par value
8.	Legal capital
9.	Treasury stock
10.	Cumulative feature

pearzebra975

QUESTION 1 The knowledge of financial accounting can assist people with decisions such as whether to extend credit to a business. True False 0.2 points Saved QUESTION 2 Employees of a company would not have a reason to use the information provided by financial accounting. True False 0.2 points Saved

QUESTION 3 Financial accounting should be used for assessing the financial health of large organizations only. True False 0.2 points Saved

QUESTION 4 Financial accounting can be helpful for a job candidate who is assessing the financial future of a potential employer. True False 0.2 points Saved QUESTION 5 Lenders might use the information produced by financial accounting when making loan decisions. True False 0.2 points Saved

QUESTION 6 Credit analysts prefer not to use information provided by financial accounting, as it is not accurate. True False 0.2 points Saved

QUESTION 7 Financial accounting is helpful to investment advisors. True False 0.2 points Saved

QUESTION 8 Financial accounting is more useful than managerial accounting. True False 0.2 points Saved

QUESTION 9 The decision to buy or rent equipment is an example of a decision aided by managerial accounting. True False 0.2 points Saved

QUESTION 10 Which of the following statements is true of financial accounting? A. It is used by external parties to make investment decisions. B. It is used to make lease or purchase decisions. C. Managerial accounting is another name for financial accounting, D. It is primarily used to make internal decisions of a business. E. The effectiveness of advertising can be judged using financial accounting. 0.2 points Saved QUESTION 11 The charge for using money over time, often associated with long-term loans, is known as: A. interest. B. principal. C. distribution charge. D. cash dividend. E. preferred dividend. 0.2 points Saved QUESTION 12 Which of the following is a common feature of financial and managerial accounting? A. Both have same objectives B. Both are prepared according to U.S. GAAP C. Both are reported at year end in the annual report D. Both are analyzed by external users while making investment decisions E. Both are used by the management in making decisions 0.2 points Saved

QUESTION 13 Dividends are required to be paid to stockholders on an annual basis. True False 0.2 points Saved

QUESTION 14 An individual who owns one or more shares of stock in a corporation is an owner of that corporation. True False 0.2 points Saved

QUESTION 15 Corporations do not exist as separate legal entities apart from their owners. True False 0.2 points Save Answer

QUESTION 16 It is very difficult to buy or sell ownership shares of a corporation in a stock exchange. True False 0.2 points Saved

QUESTION 17 Stock markets match up investors who wish to buy shares with those who wish to sell them. True False 0.2 points Saved

QUESTION 18 Legal process by which owners of an organization apply to a state government to have it identified as an entity legally separate from its owners is called: A. stocking. B. filling. C. attributing. D. registration. E. incorporation. 0.2 points Saved

QUESTION 19 An advantage of ownership in a sole proprietorship over ownership in a corporation is: A. tax benefits. B. having a board of directors. C. the ability to raise capital through issuance of stock. D. separation of owner and business as legal entities. E. limited liability for debts. 0.2 points Saved

QUESTION 20 Who hires the management of a corporation? A. Stockholders B. Board of directors C. Creditors D. Government E. SEC 0.2 points Saved QUESTION 21 Inventory refers to the: A. excess amount paid for an asset over its fair value. B. intangible assets of a business. C. merchandise bought or manufactured for the purpose of selling. D. amount of net income reinvested by company for future operations. E. revenue generated from investment. 0.2 points Saved QUESTION 22 Investors use financial information to predict whether a: A. company will recruit more employees. B. company's stock price will increase C. company has invested in buildings. D. company will pay salaries. E. company's bond price will increase. 0.2 points Saved

QUESTION 23 Financial accounting can be compared to a portrait. True False 0.2 points Saved

QUESTION 24 Financial statements provide the form and structure for the conveyance of financial information that will create a likeness of the reporting organization. True False 0.2 points Saved

QUESTION 25 The information reported in financial statements must be exact for an investor to make any decision. True False 0.2 points Saved

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ACCT 1209 Chapter Notes - Chapter 11: Kroger, Dividend, Treasury Stock

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