Account Exam 1 with answers garded A+ 2020 100% verified

Advantages of corp - limited liability, additional capital, easy transfer of money Disadvantages of corp - regulation and management issues, double taxation 2 basic sources of stockholders equity - retained and contributed earnings Retained earnings of a corporation are - internally generated capital that is raised from profitable operations What happens when a shareholder invests cash in a corporation in exchange for stock? - Both assets and stockholders equity are increased On what date do cash dividends become a liability of a corporation? - Declaration date What are dividends? - Dividends are a distribution of cash, stock, or other assets to the stockholders The purchase (buying) of treasury stock: - decreases assets and stockholders equity Preferred stock: - gives its owners certain benefits over common stock What happens when a 2-fo-1 stock split occurs: - Common stock doubles and is then split in half, therefore it is reduced to half the original amount and stays the same. What is true of a bond that is issued at a premium: - It will be sold above par If a bond's stated interest rate is the same as the market rate, what is true? - The bond will be issued at par The reason investors buy bonds is to: - earn interest If bonds with a face value of $200,000 are sold at 98, the amount of cash proceeds is: - 200,000 * .98 = 196,000 Operating activities on statement of cash flows: - current assets and liabilities (expenses,wages,cash) Financing activities on statement of cash flows: - long term liabilities (stock, cash dividends) Investing activities on statement of cash flows: - long term assets (plant, equipment, property) Includes increase and decrease in long term assets: - investing section on statement of cash flows The purchase of equipment financed by a long term notes payable is an example of: - non-cash and investing activity While preparing a statement of cash flows under the indirect method, the depreciation expense: - is added back as an adjustment to net income in the operating activities section 3 major categories of statement of cash flows: - operating, financing, investing Amortization schedule - details loan payments between principal and interest at beginning/end of loan payments mortgages payable - long term debts backed with security interest in specific property bonds payable - long term debts issued to multiple lenders called bondholders