ACC 100 Chapter Notes - Chapter 11: Stock Split, Dividend Payout Ratio, Dividend

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28 Jun 2018

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ACC Chapter 11

Read page 517 - 524, 526-529

Shares are popular because they generally provide a higher rate of return than can

be obtained by creditors who receive interest from lending money

The shareholders are the owners of a corporation (have residual interest in its

assets after the claims of all creditors have been satisfied)

Total shareholders equity = contributed capital + retained earnings

Contributed capital represents the amount the corporation has received from the

sale of shares to shareholders

Retained earnings is the amount of net income that the corporation has earned but

not paid as dividends (corporation retains and reinvests the income)

Retained earnings shows a link between balance sheet and income statement

Articulated statements - refers to the fact that the information on the income

statement is related to the information on the balance sheet

Authorized Shares - the maximum number of shares a corporation may issue as

indicated in the corporate charter

Issued Shares - the number of shares sold or distributed to shareholders

Outstanding Shares - the number of shares issued less the number of shares held

as treasury stock if any

Par Value - an arbitrary amount stated on the face of the share certificate

representing the legal capital of the corporation

Additional paid-in capital - an amount receive that is greater than the par value of

the shares when shares were issued

Retained earnings - net income that has been made by the corporation but not paid

out as dividends plus or minus miscellaneous specified items

Cumulative feature - the right to dividends in arrears before the current-year

dividend is distributed

Convertible feature - allows preferred shares to be exchanged for common shares

Callable feature - allows the firm to eliminate a class of shares by paying the

shareholders a specified amount

Dividend payout ratio - the annual dividend amount divided by the annual net

income

Cash dividends become a liability on the date they are declared

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Document Summary

Shares are popular because they generally provide a higher rate of return than can be obtained by creditors who receive interest from lending money. The shareholders are the owners of a corporation (have residual interest in its assets after the claims of all creditors have been satisfied) Total shareholders equity = contributed capital + retained earnings. Contributed capital represents the amount the corporation has received from the sale of shares to shareholders. Retained earnings is the amount of net income that the corporation has earned but not paid as dividends (corporation retains and reinvests the income) Retained earnings shows a link between balance sheet and income statement. Articulated statements - refers to the fact that the information on the income statement is related to the information on the balance sheet. Authorized shares - the maximum number of shares a corporation may issue as indicated in the corporate charter. Issued shares - the number of shares sold or distributed to shareholders.

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

7 Effect of issuing common stock on the balance sheet

Newly formed Electronics Services Corporation has 100,000 sharesof $10 par common stock authorized. On March 1, 2014, ElectronicsServices issued 20,000 shares of the stock for $12 per share. OnMay 2 the company issued an additional 30,000 shares for $15 pershare. Electronics Services was not affected by other events during2014.

Required

Record the transactions in a horizontal statements model likethe following one. In the Cash Flow column, indicate whether theitem is an operating activity (OA), an investing activity (IA), ora financing activity (FA). Use NA to indicate that an element wasnot affected by the event. (Enter any decreases to accountbalances and cash outflows with a minus sign.)

ELECTRONIC SERVICES CORPORATION

HORIZONTAL STATEMENTS MODEL

DATE CASH=LIABILITIES+COMMON STOCK+PAID N CAPITALREV.-EXPENSE=NET STATEMENT

IN EXCESS INCOME OF CASH FLOW

March 1, 2014

May 1, 2014

b. Determine the amount Electronics Serviceswould report for common stock on the December 31, 2014, balancesheet. COMMON STOCK( )

c. Determine the amount Electronics Serviceswould report for paid-in capital in excess of par.

PAID IN CAPITAL EXCESS OF PAR( )

d.	What is the total amount ofcapital contributed by the owners? TOTAL PAID IN CAPITAL ( )

What amount of total assets would Electronics Services report onthe December 31, 2014, balance sheet? TOTAL ASSETS ( )

10 Effect of cash dividends on financial statements

On October 1, 2014, Daster Corporation declared a $59,600 cashdividend to be paid on December 15 to shareholders of record onNovember 1.

Required

Record the events occurring on October 1 and December 15 in ahorizontal statements model like the following one. In the CashFlow column, indicate whether the item is an operating activity(OA), an investing activity (IA), or a financing activity (FA). Theletters NA indicate that an element is not affected by the event.(Enter any decreases to account balances and cash outflowswith a minus sign.)

DASTER CORPORATION

HORIZONTAL STATEMENT MODEL

DATE ASSETS=LIABILITIES+COMMON+RETAINED REVENUE-EXPENSES=NETSTATEMENT

STOCK EARNINGS INCOME CASH FLOWS

10/01

11/01

12/15

lilacbeetle706

16. Mendes Charters reported the following information atDecember 31, 2015:

Preferred stock, $100 par, 500 shares authorized, andoutstanding;

cumulative; nonparticipating; callable at par value $50,000

Common stock, $12 par, 50,000shares authorized and outstanding 600,000

Additional paid-incapital--Common 25,000

Retained earnings825,000

Mendesâ total contributed capitalis

a. $ 650,000 b. $ 675,000 c. $1,500,000 d. $ 625,000

17. Which of the following should be considered when a companydecides to declare a cash dividend on common stock?

a. The retained earnings balance only

b. The amount of authorized shares of common stock

c. The book value of the company's stock

d. The cash available and the retained earnings balance

18. The primary reason for a stock split is to

a. distribute cash to the investor.

b. decrease the market value of the stock.

c. decrease the number of shares outstanding.

d. increase the contributed capital of the corporation.

19. Nordic Exports Inc. reported net income of $150,000 for2015, but its cash balance decreased $40,000. Which financialstatement should Nordic Exportsâ management refer to for anexplanation of this situation? a

. Balance Sheet

b. Income Statement

c. Statement of Retained Earnings

d. Statement of Cash Flows

20. The primary purpose of the statement of cash flows is toprovide information about

a. the financial position of the company.

b. the profitability of the company.

c. the investing and financing activities of the company.

d. the cash inflows and outflows of the company.

21. Cash flows from acquiring and disposing of long-term assetsare classified as

a. operating activities.

b. investing activities

. c. financing activities.

d. purchasing activities.

22. Cash flows from borrowing and paying off a 90-day bank loanare classified as

a. operating activities. b. investing activities. c. financingactivities. d. purchasing activities.

23. Cash flows from issuing and repurchasing stock or issuingand repaying (retiring) debt are classified as

a. operating activities. b. investing activities. c. financingactivities. d. borrowing activities.

24. Cash flows from acquiring and selling products areclassified as

a. operating activities. b. investing activities. c. financingactivities. d. distribution activities.

25. Presented below is the operating activities section of thestatement of cash flows for Golden Consulting for 2016:

Operating activities:

Net income $ 92,000

Add: Depreciation 20,000

Decrease in accounts receivable 8,000

__________

$120,000

Deduct: Decrease in accounts payable (6,000)

Net cash inflow from operating activities $114,000

Which method of preparing the operating activities section hasGolden Consulting used?

a. The direct method b. The indirect method c. Either method d.Cannot be determined without further information

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ACC 100 Chapter Notes - Chapter 11: Stock Split, Dividend Payout Ratio, Dividend

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