ACCOUNTING II Chapter 11 Reading Guide. Answer the following questions as you read Chapter 11, pages

Due: Name: Hour: ACCOUNTING II Chapter 11 Reading Guide Answer the following questions as you read Chapter 11, pages 311-333. 11-1: Starting a Corpo...
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Name: Hour: ACCOUNTING II Chapter 11 Reading Guide

Answer the following questions as you read Chapter 11, pages 311-333. 11-1: Starting a Corporation 1.

What is the biggest difference between proprietorships/partnerships and corporations? 

2.

3.

Define the following terms: 

share of stock:



stockholder:



dividends:

What is the “board of directors”? 

4.

What are the “board of directors” responsibilities?  

5.

How does a business become incorporated? 

6.

What are “articles of incorporation”? Once approved, what is issued to the business?  

7.

What are the three basic rights of stockholders?   

ACCOUNTING II

8.

Chapter 11 Reading Guide

What are the two basic kinds of capital stock?  

9.

What is a stock certificate? When is a stock certificate issued?  

10. What is a stock transfer? 

11. What is a transfer agent? 

12. What is a par value stock? 

13. What is a no-par value stock? 

14. What is a state-valued stock? How is a stated-value stock similar (or different) to a par-value stock?  

15. If a corporation issues only one kind of stock, which type would they issue? In most corporations, what right do these stockholders have that other stockholders do not?  

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ACCOUNTING II

Chapter 11 Reading Guide

16. Why might a corporation issue preferred stock? 

17. What is a right that preferred stockholders DO NOT have? Why do preferred stockholders not have this right?  

18. What are two typical rights that are given to preferred stockholders?  

19. Why do corporations not have a separate capital account for each stockholder? If only common stock is offered, what is the name of the capital account?  

20. In which account is a corporation’s net income recorded? Why is this account used instead of the capital stock account?  

21. What is a debit balance in the Retained Earnings account often referred to as? (See FYI, page 319) 

22. What may organization costs include? (list three)   

23. Why aren’t organization costs expensed in the first year? 

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ACCOUNTING II

Chapter 11 Reading Guide

24. How is the account ORGANIZATION COSTS classified? What is its normal balance side?  

11-2: Stock Subscriptions and the Balance Sheet 25. What is “subscribing for capital stock”? 

26. How is the account SUBSCRIPTIONS RECEIVABLE classified? (if necessary, see Chart of Accounts on page 311) 

27. What is the purpose of the STOCKS SUBSCRIBED-COMMON account? Why is the “capital stock” account not used for stock subscriptions?  

28. What are intangible assets? 

29. What accounts are affected and how (debit/credit) when stock is subscribed?  

30. What accounts are affected and how (debit/credit) when subscribed has been fully paid for and stock certificates are going to be issued?  

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ACCOUNTING II

Chapter 11 Reading Guide

31. Who must approve the selling of stocks in a publicly traded company? See FYI or Remember boxes on page 325. 

11-3: Calculating and Journalizing Dividends 32. What are the three important dates involved with declaring a dividend? Give a brief description of each type of date. 

Date of declaration.



Date of record.



Date of payment.

33. On which of the two dates above are journal entries recorded?  

34. Can the Board of Directors decide not to pay a dividend once it has been declared? Explain. 

35. Let’s assume the Board of Directors declares they are going to pay $36,000 in dividends. Now it has to be decided how that will be divided between common and preferred stock holders. Preferred stockholders are paid first. If the value of preferred stock is $100,000 and they are guaranteed a dividend of 10%, how much of the $36,000 will the Preferred Stockholders get? Show your work. 

36. In the question above, the total dividend the Board of Directors is going to pay is $36,000. The Preferred Stockholders are paid first. How much of the dividend will be left for the Common Stockholders? (Take total dividend and subtract amount Preferred Stockholders are being paid). Show work. 

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ACCOUNTING II

Chapter 11 Reading Guide

Business Structures: Advantages and Disadvantages of a Corporation (page 329) 37. What are two advantages of organizing as a corporation?  

38. What are three disadvantages of organizing as a corporation?   

39. What is meant when someone says the earnings of a corporation are subject to double taxation? 

Exploring Accounting (page 333) 40. What is a stock split? 

41. If you own stock, and the stock is split, do you own more stock after the split? Explain. 

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