Corporations Organization, Stock Transactions, and
Dividends COMPREHENSIVE QUESTIONS AND
VERIFIED SOLUTIONS
Corporation - ✔✔A legal entity, distinct and separate from the individuals who
create and operate the business. Stock - ✔✔Shares of ownership of a
corporation. Shareholders - ✔✔Individuals or entities who own the stock of the
corporation. Public corporations - ✔✔Corporations whose shares of stock are
traded in public markets. Private corporations - ✔✔Corporations whose stock is
not traded publicly and are usually owned by a small group of investors.
Limited liability - ✔✔Creditors may not go beyond the assets of the corporation
to satisfy their claims. Board of Directors (BOD) - ✔✔Elected by stockholders to
control a corporation and establish corporate policies. Dividends -
✔✔Corporate income that is distributed to stockholders. DOUBLE TAXATION -
✔✔Major disadvantage of the corporate form where both the corporation and
stockholders are taxed. Bylaws - ✔✔Rules and procedures for conducting
corporate affairs prepared by corporate management and the BOD.
Organizational costs - ✔✔Costs incurred during the process of incorporating a
business. Paid-in-capital (PIC) - ✔✔The amount of capital that shareholders
have invested in the corporation through the purchase of stock. Outstanding
stock - ✔✔The stock remaining in the hands of the stockholders. Par value -
✔✔Monetary value assigned to stock. Stock certificates - ✔✔Documents issued
to stockholders to document ownership. No-par stock - ✔✔Stock issued with
no monetary value. Cumulative preferred stock - ✔✔Preferred stock that has a
right to receive regular dividends that were not declared in prior years.
Noncumulative preferred stock - ✔✔Preferred stock that does not have the right
to receive dividends that were not declared in prior years. Dividends in arrears
- ✔✔Cumulative preferred stock dividends that have not been paid in prior
years. Common stock - ✔✔Stock that has equal rights for each share and
represents ownership in a corporation. Preferred stock - ✔✔Stock that has
preferential rights, such as preference to dividends. Dividend rights - ✔✔The
rights of stockholders to receive dividends from the corporation. Premium on
stock - ✔✔When stock is issued for a price that is more than par. Discount on
stock - ✔✔When stock is issued for a price that is less than par. Fair market
Dividends COMPREHENSIVE QUESTIONS AND
VERIFIED SOLUTIONS
Corporation - ✔✔A legal entity, distinct and separate from the individuals who
create and operate the business. Stock - ✔✔Shares of ownership of a
corporation. Shareholders - ✔✔Individuals or entities who own the stock of the
corporation. Public corporations - ✔✔Corporations whose shares of stock are
traded in public markets. Private corporations - ✔✔Corporations whose stock is
not traded publicly and are usually owned by a small group of investors.
Limited liability - ✔✔Creditors may not go beyond the assets of the corporation
to satisfy their claims. Board of Directors (BOD) - ✔✔Elected by stockholders to
control a corporation and establish corporate policies. Dividends -
✔✔Corporate income that is distributed to stockholders. DOUBLE TAXATION -
✔✔Major disadvantage of the corporate form where both the corporation and
stockholders are taxed. Bylaws - ✔✔Rules and procedures for conducting
corporate affairs prepared by corporate management and the BOD.
Organizational costs - ✔✔Costs incurred during the process of incorporating a
business. Paid-in-capital (PIC) - ✔✔The amount of capital that shareholders
have invested in the corporation through the purchase of stock. Outstanding
stock - ✔✔The stock remaining in the hands of the stockholders. Par value -
✔✔Monetary value assigned to stock. Stock certificates - ✔✔Documents issued
to stockholders to document ownership. No-par stock - ✔✔Stock issued with
no monetary value. Cumulative preferred stock - ✔✔Preferred stock that has a
right to receive regular dividends that were not declared in prior years.
Noncumulative preferred stock - ✔✔Preferred stock that does not have the right
to receive dividends that were not declared in prior years. Dividends in arrears
- ✔✔Cumulative preferred stock dividends that have not been paid in prior
years. Common stock - ✔✔Stock that has equal rights for each share and
represents ownership in a corporation. Preferred stock - ✔✔Stock that has
preferential rights, such as preference to dividends. Dividend rights - ✔✔The
rights of stockholders to receive dividends from the corporation. Premium on
stock - ✔✔When stock is issued for a price that is more than par. Discount on
stock - ✔✔When stock is issued for a price that is less than par. Fair market
