《会计学原理Financial-Accounting-by-Robert-Libby第八版-第十一章-答案》由会员分享，可在线阅读，更多相关《会计学原理Financial-Accounting-by-Robert-Libby第八版-第十一章-答案（43页珍藏版）》请在金锄头文库上搜索。
1、Chapter 11Reporting and Interpreting Owners EquityANSWERS TO QUESTIONS1.A corporation is a separate legal entity (authorized by law to operate as an individual). It isowned by a number of persons and/or entities whose ownership is evidenced by shares ofcapital stock. Its primary advantages are: (a)
2、transferability of ownership, (b) limited liability to the owners, and (c) the ability to accumulate large amounts of resources.2.The charter of a corporation is a legal document from the state that authorizes its creation as a separate legal entity. The charter specifies the name of the entity, its
3、 purpose, and the kinds and number of shares of capital stock it can issue.3.(a)Authorized capital stockthe maximum number of shares of stock that can be sold and issued as specified in the charter of the corporation.(b)Issued capital stockthe total number of shares of capital stock that have been i
4、ssued by the corporation at a particular date.(c)Outstanding capital stockthe number of shares currently owned by the stockholders.4.Common stockthe usual or normal stock of the corporation. It is the voting stock and generally ranks after the preferred stock for dividends and assets distributed upo
5、n dissolution. Often it is called the residual equity. Common stock may be either par value or no-par value.Preferred stockwhen one or more additional classes of stock are issued, the additional classes are called preferred stock. Preferred stock has modifications that make it different from common
6、stock. Generally, preferred stock has both favorable and unfavorable features in comparison with common stock. Preferred stock usually is par value stock and usually specifies a dividend rate such as “6% preferred stock.”5.Par value is a nominal per share amount established for the common stock and/
7、or preferred stock in the charter of the corporation, and is printed on the face of each stock certificate. The stock that is sold by a corporation to investors above par value is said to have sold at a premium, while stock that is sold below par is said to have sold at a discount. The laws of pract
8、ically all states forbid the initial sale of stock by a corporation to investors below par value. No-par value stock does not have an amount per share specified in the charter. As a consequence, it may be issued at any price without involving a discount or a premium. It avoids giving the impression
9、of a value that is not present.6.The usual characteristics of preferred stock are: (1) dividend preferences, (2) conversion privileges, (3) asset preferences, and (4) nonvoting specifications.7.The two basic sources of stockholders equity are:Contributed capitalthe amount invested by stockholders by
10、 purchase from the corporation of shares of stock. It is comprised of two separate elements: (1) the par or stated amount derived from the sale of capital stock (common or preferred) and (2) the amount received in excess of par or stated value.Retained earningsthe accumulated amount of all net incom
11、e since the organization of the corporation, less losses and less the accumulated amount of dividends paid by the corporation since organization.8.Stockholders equity is accounted for in terms of source. This means that several accounts are maintained for the various sources of stockholders equity,
12、such as common stock, preferred stock, contributed capital in excess of par, and retained earnings.9.Treasury stock is a corporations own capital stock that was sold (issued) and subsequently reacquired by the corporation. Corporations frequently purchase shares of their own capital stock for sound
13、business reasons, such as to obtain shares needed for employees bonus plans, to influence the market price of the stock, to increase earnings per share amounts, and to have shares on hand for use in the acquisition of other companies. Treasury stock, while held by the issuing corporation, confers no
14、 voting, dividend, or other stockholder rights.10.Treasury stock is reported on the balance sheet under stockholders equity as a deduction; that is, as contra stockholders equity. Any “gain or loss” on treasury stock that has been sold is reported on the financial statements as an addition to contri
15、buted capital if a gain; if a loss, it is deducted from any previous contributed capital, or otherwise from retained earnings.11.The two basic requirements to support a cash dividend are: (1) cash on hand or the ability to obtain cash sufficient to pay the dividend and (2) a sufficient balance in re
16、tained earnings, because the dividend represents a return of earnings to the stockholders. A cash dividend reduces both the assets of a corporation and stockholders equity by the amount of the dividend.12.Cumulative preferred stock has a dividend preference such that, should the dividends on the preferred stock for any year, or series of years, not be paid, dividends cannot be paid to the common stockholders until all su
