Financial Accounting CH 11 Flashcards

11/18/22, 10:53 AM Financial Accounting Ch 11 Flashcards | Chegg.
com
Find over 500 million flashcards Search
Financial Accounting Ch 11
68 cards Finance | Financial Accounting
Practice all cards
The owners of a(n) are not personally responsible for the debts of the business. (Enter only one word
per blank.)
corporation, LLC, or limited liability company
An advantage of
financing is interest is tax deductible. (Enter only one word per blank.)
Blank 1: debt
True or false: When a corporation declares a dividend its Net Income on the income statement is
reduced.
False
Contributed capital of $1,000,000 represents ______.
the amount stockholders have invested in exchange for stock
When a corporation buys back its own stock, the stock is reported on the balance sheet as ______.
Treasury Stock
https://www.chegg.com/flashcards/financial-accounting-ch-11-38e468a2-e43b-49e1-b6a7-b570ae97029c/deck 1/13
11/18/22, 10:53 AM Financial Accounting Ch 11 Flashcards | Chegg.com
If you own stock in a corporation that goes bankrupt, you ______.
only stand to lose what you paid to buy the stock
An advantage of financing is that dividends are optional. (Enter only one word per blank.)
Blank 1: equity
Transactions between a company and its stockholders affect the company's _____ accounts only.
balance sheet
Stockit, Inc. issued 100,000 shares of the 1,000,000 shares authorized. Stockit has repurchased 10,000
of its shares. The number of shares authorized represents the ______. (Check all that apply.)
maximum number of shares Stockit is allowed to issue
Contributed capital of $1,000,000 is found in the ______ section of the ______.
stockholders' equity; balance sheet
AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000
of these shares. The number of shares outstanding equals ______ shares.
90,000
Reason: The number of shares authorized equals 1,000,000 which is the maximum shares the company
is allowed to issue. Of the 1,000,000 shares, the company has issued 100,000 and bought back 10,000
leaving 90,000 shares outstanding.
Treasury stock is reported in the ______.
stockholders' equity section of the balance sheet
Reason: Treasury stock is a contra-equity account and is reported in the equity section of the balance
sheet. There is no "financing section" on an income statement.
Common stock's par value ______. (Check all that apply.)
has become less meaningful because states use other means to prevent stockholders from removing
capital from financially distressed companies
affects how common stock is recorded
was introduced to prevent bankrupt companies from unfairly distributing company resources
If a business cannot pay its debts, creditors can expect the owner(s) to pay the debts with their
personal assets if the business is a ______. (Check all that apply.)
sole proprietorship
general partnership
Advantages of debt financing over equity financing include that ______. (Check all that apply.)
stockholders' control will not be diluted
interest payments are tax deductible
Stockit, Inc. issued 100,000 shares of the 1,000,000 shares it is allowed to issue. Stockit has
repurchased 10,000 of its own shares. The number of shares authorized equals ______ shares.
1,000,000
When a corporate charter does not specify a legal value per share, then the stock issued is referred to
as ______.
no-par value stock
AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000
of these shares. The number of shares issued equals ______ shares.
$100,000
Common stock's par value is ______.
an insignificant amount specified in the corporate charter
If you own stock in a corporation that goes bankrupt, you ______.
Common stock will be overstated
Additional paid-In capital will be understated
Reason: Common stock is overstated and Additional paid-in capital is understated. The errors offset
each other thus total SE is correct
Which form of financing has a tax advantage?
debt financing
When a stockholder sells its shares of ABC Co. to another person at a price higher than what the
stockholder purchased it for, ABC records ______.
nothing
True or false: Some states allow corporations to issue no-par value common stock.
True
Reason: Since par value is less meaningful today, some states no longer require a specified legal value
per share.
Investors earn a return on stock investments by ______. (Check all that apply.)
receiving dividends
selling the stock for more than its cost
Reason: At the time of purchase, the stock's cost equals the market price. If the company performs well,
the market price of the stock will hopefully increase above the original cost.
The number of shares issued represents the number of shares ______.
has become less meaningful because states use other means to prevent stockholders from removing
capital from financially distressed companies
was introduced to prevent bankrupt companies from unfairly distributing company resources
affects how common stock is recorded
Dividends Payable is a(n) __ account with a normal __ balance and is initially recorded on the __ date.
(Enter one word per blank.)
Blank 1: liability or liabilities

Blank 2: credit or cr
Blank 3: declaration or declared dividend
The entry to record the issuance of 100,000 shares of $0.10 par value common stock for $10 per share
is debit ______.
Cash for $1,000,000 and credit Common Stock for $10,000 and Additional Paid-in Capital for $990,000
Reason: The entry includes a $1,000,000 debit to Cash (+A) and a $10,000 credit to Common Stock
(+SE) and $990,000 to Additional Paid-In Capital (+SE).
When a stockholder sells its shares to another person for more than its original cost, the corporation
______.
does not make a journal entry
The effect on the accounting equation of declaring a cash dividend includes ______. (Check all that
apply.)
an increase in liabilities
a decrease in stockholders' equity
Investors acquire common stock because they expect a return on their investment from ______.
(Select all that apply.)
increases in stock prices
distributions of dividends
A stock dividend ______. (Check all that apply.)
distributes additional shares of stock to existing stockholders on a pro rata basis.
causes retained earnings to decrease
Lox, Stock and Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased
5,000 of its shares. The number of shares outstanding equals ______ shares.
45,000
Reason: The 45,000 shares outstanding equals the number issued of 50,000 minus the 5,000 shares
bought back by the company.
Preferred stock is advantageous in that it ______. (Check all that apply.)
has priority over common stock at liquidation
has priority over common stock when dividends are declared
The declaration of a dividend results in ______. (Select all that apply.)
a decrease in Retained Earnings after temporary accounts are closed
an increase in liabilities
an increase in Dividends
When a company issues of shares of $0.10 par value common stock for $10 per share, it will record a
______.
credit to Additional Paid-in Capital for the difference between the $10 price and the $0.10 par value
Reason: The entry includes a debit to Cash (+A) for the sales price and a credit to Common Stock (+SE)
for the par value and the difference is credited to Additional Paid-In Capital (+SE).
Retained Earnings represents cumulative ______ by the business. (Check all that apply.)
profits retained
net income kept
The journal entry to record the declaration of a dividend includes ______. (Select all that apply.)
a debit to Dividends
a credit to Dividends Payable
Accumulated Deficit ______. (Check all that apply.)
is shown in parentheses on the balance sheet
means that Retained earnings has a debit balance
indicates accumulated net losses
Similar to a stock split, a stock __ also distributes additional shares of stock to existing stockholders on
a pro rata basis at no cost to the
Blank 1: dividend
Which of the following line item amounts would be under the Retained Earnings column of a statement
of stockholders' equity? (Select all that apply.)
Net Income
Dividends: Common
Dividends: Preferred
__ stock carries priority over common stock with regard to dividends. (Enter only one word per blank.)
Blank 1: Preferred
Select those statements below that are true about cash dividends. (Check all that apply.)
On the payment date, current assets are decreased.
On the declaration date, liabilities are increased.
Earnings per share (EPS) equals ______ divided by the average shares of common stock outstanding.
(Assume no preferred stock has been issued.)
Net Income
A company's past profits that are kept instead of being paid to stockholders are ______.
retained earnings
Which of the following reports net income relative to average common stockholders' equity?
ROE
An accumulated deficit means a company has ______.
accumulated more net losses than net income
Which of the following would be found on a statement of stockholders' equity? (Select all that apply.)
Net Income
Additional Paid-in Capital
Treasury Stock
Dividends
Stock Issuances
Preferred stock is advantageous in that it ______. (Check all that apply.)
has priority over common stock when dividends are declared
has priority over common stock at liquidation
Earnings per share (EPS) may be determined by ______. (Check all that apply.)
dividing the stock price by the P/E ratio
dividing net income less preferred dividends by the average common shares outstanding
The P/E ratio is calculated by ______.
dividing the stock price by EPS
During the year, Squid Roe Inc.'s revenues were $200,000 and its net income was $60,000. It had not
preferred shares, and its stockholders' equity and total assets were $380,000 and $780,000 at the
beginning of the year and $420,000 and $900,000 at year-end, respectively. ROE (rounded to the
nearest tenth of a percent) equals ______.
15.0%
Reason: $60,000/(($380,000+420,000)/2)
Identify the equity accounts for a sole proprietorship. (Check all that apply.)
Capital
Drawing
Accumulated Deficit ______. (Check all that apply.)
means that Retained earnings has a debit balance
is shown in parentheses on the balance sheet
indicates accumulated net losses
Ida Hoe, the owner of Ida Hoe's Potatoes, withdrew $5,000 from her sole proprietorship. Match the
following account titles with the appropriate dollar amount to reflect this withdrawal.
a. I. Hoe, Drawings
b. Cash
c. I. Hoe, Capital
a. I. Hoe, Drawings - Debit $5,000
b. Cash - Credit $5,000
c. I. Hoe, Capital - No effect
Preferred stock ______. (Check all that apply.)
has preference as to dividends
is useful for raising capital without reducing common stockholders' control
The entry to record the transaction for a sole proprietorship when the owner invests cash includes a
______. (Check all that apply.)
debit to Cash
credit to Capital
During the year, Lox, Stock and Bagel Inc.'s net income was $60,000. Its average stockholders' equity
was $240,000, and it had 120,000 shares outstanding the entire year. Its stock was selling for $10 per
share. Its P/E ratio equals ______. The company has no preferred stock.
20.00
Reason: $10/($60,000/120,000 shares)
If a business has one capital account and one drawing account, then the business must be a ______.
sole proprietorship
Why is Additional Paid-in Capital recorded for a small stock dividend?
Because small stock dividends are recorded at market value.
Reason: Because a small stock dividend is recorded at market value, Additional Paid-in Capital is used to
report the amount by which the market value of the stock exceeds its par value.
Similar to the Dividends account of a corporation is the

account of a sole proprietorship and is used to record amounts paid to the owner. (Enter one word per
blank.)
Blank 1: Drawing
The statement of __ __ reports the changes in retained earnings as well as paid-in capital. (Enter one
word per blank.)
Blank 1: stockholders'
Blank 2: equity
Barry Rich invested $5,000 of his personal income into his sole proprietorship, Rich's Farm. The effect
of this transaction on Rich's Farm includes a(n) ______. (Check all that apply.)
increase in assets
increase in owner's equity
The P/E ratio is calculated by ______.
Retained Earnings
Common Stock
An increase to Rich's Farm's account called Barry Rich, Capital would occur when ______.
Barry Rich invests cash in Rich's Farm
Which of the following accounts is used to record a small stock dividend on common stock but is not
used to record a large stock dividend on common stock?
The effect on the accounting equation when an owner forms a sole proprietorship by investing cash is
increase assets
increase owners' equity
The entry to record the transaction for a sole proprietorship when the owner invests cash includes a
debit to Cash
credit to Capital
Barry Rich invested $5,000 of his personal income into his sole proprietorship, Rich's Farm. The effect
of this transaction on Rich's Farm includes a(n) ______. (Check all that apply.)
increase in owner's equity
increase in assets
COMPANY
LEGAL & POLICIES
CHEGG PRODUCTS AND SERVICES
CHEGG NETWORK
CUSTOMER SERVICE
© 2003-2022 Chegg Inc. All rights reserved.

Financial Accounting CH 11 Flashcards

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Financial Accounting CH 11 Flashcards

Uploaded by

Copyright:

Available Formats

11/18/22, 10:53 AM Financial Accounting Ch 11 Flashcards | Chegg.

Find over 500 million flashcards Search

Practice all cards

corporation, LLC, or limited liability company

Contributed capital of $1,000,000 represents ______.

the amount stockholders have invested in exchange for stock

If you own stock in a corporation that goes bankrupt, you ______.

only stand to lose what you paid to buy the stock

maximum number of shares Stockit is allowed to issue

Contributed capital of $1,000,000 is found in the ______ section of the ______.

stockholders' equity; balance sheet

Treasury stock is reported in the ______.

stockholders' equity section of the balance sheet

Common stock's par value ______. (Check all that apply.)

affects how common stock is recorded

stockholders' control will not be diluted

interest payments are tax deductible

no-par value stock

Common stock's par value is ______.

an insignificant amount specified in the corporate charter

If you own stock in a corporation that goes bankrupt, you ______.

Common stock will be overstated

Additional paid-In capital will be understated

Which form of financing has a tax advantage?

selling the stock for more than its cost

The number of shares issued represents the number of shares ______.

affects how common stock is recorded

Blank 1: liability or liabilities

does not make a journal entry

a decrease in stockholders' equity

increases in stock prices

A stock dividend ______. (Check all that apply.)

distributes additional shares of stock to existing stockholders on a pro rata basis.

causes retained earnings to decrease

Preferred stock is advantageous in that it ______. (Check all that apply.)

has priority over common stock at liquidation

The declaration of a dividend results in ______. (Select all that apply.)

a decrease in Retained Earnings after temporary accounts are closed

net income kept

a credit to Dividends Payable

Accumulated Deficit ______. (Check all that apply.)

is shown in parentheses on the balance sheet

means that Retained earnings has a debit balance

On the payment date, current assets are decreased.

On the declaration date, liabilities are increased.

An accumulated deficit means a company has ______.

accumulated more net losses than net income

Additional Paid-in Capital

Preferred stock is advantageous in that it ______. (Check all that apply.)

has priority over common stock when dividends are declared

has priority over common stock at liquidation

dividing the stock price by the P/E ratio

The P/E ratio is calculated by ______.

dividing the stock price by EPS

Accumulated Deficit ______. (Check all that apply.)

means that Retained earnings has a debit balance

is shown in parentheses on the balance sheet

indicates accumulated net losses

a. I. Hoe, Drawings - Debit $5,000

c. I. Hoe, Capital - No effect

Preferred stock ______. (Check all that apply.)

has preference as to dividends

Contributed capital of $1,000,000 is found in the section of the .