1How does Other Comprehensive Income (OCI) affect Stockholders’ Equity?
Statement of Comprehensive Income → OCI → Accumulated Other Comprehensive Income → Stockholders’ Equity
2What is Comprehensive Income?
Net Income + Other Comprehensive Income
3What is Paid-in Capital (PIC)?
Amounts invested by shareholders, including common stock, preferred stock, and APIC
4What is Additional Paid-in Capital (APIC)?
The excess amount paid over par value when shares are issued
5What is Retained Earnings?
Cumulative net income minus dividends distributed to shareholders
6What is Treasury Stock?
Previously issued shares that the company has repurchased (contra-equity account)
7What is a dividend?
A distribution of assets a company has earned on behalf of its shareholders
8When does a company record a liability for a cash dividend?
When the board of directors declares the dividend
9What is the journal entry on the declaration date of a cash dividend?
Debit Retained Earnings and credit Dividends Payable
10What happens on the date of record for a dividend?
No journal entry is made
11What is the journal entry on the payment date of a cash dividend?
Debit Dividends Payable and credit Cash
12What is the ex-dividend date?
The date by which shares must be purchased to receive the declared dividend (usually two business days before the record date)
13What is a liquidating dividend?
A dividend that exceeds retained earnings, with the excess debited to Additional Paid-in Capital
14What is a property dividend?
A noncash asset distributed to shareholders, recorded at fair value
15How are gains or losses handled in a property dividend?
Any appreciation is recognized before distribution
16What is a stock dividend?
A distribution of additional shares to current shareholders that does not affect assets or liabilities
17How is a small stock dividend (less than 25%) recorded?
Debit Retained Earnings at market value, credit Common Stock at par, and credit APIC for the excess
18How is a large stock dividend (25% or more) recorded?
Debit Retained Earnings at par value and credit Common Stock (no APIC)
19What is the objective of a stock split?
To reduce the per-share market price and increase marketability
20How is a stock split recorded?
No journal entry; par value per share is adjusted
21What is a stock split effected in the form of a stock dividend?
A large stock distribution recorded with a journal entry instead of adjusting records
22What fundamental rights do common shareholders typically have?
Right to vote, share in profits when dividends are declared, and share in assets upon liquidation
23What is the preemptive right?
The right to maintain ownership percentage when new shares are issued
24What advantage do preferred shareholders typically have over common shareholders?
Dividend priority and liquidation preference
25What does cumulative preferred stock mean?
Dividends in arrears accumulate and must be paid before common dividends
26What does participating preferred stock mean?
Preferred shareholders may receive additional dividends beyond the stated rate
27How are mandatorily redeemable preferred shares classified?
As a liability rather than equity
28What is a retained earnings restriction?
A designation indicating that a portion of retained earnings is unavailable for dividends
29What is par value?
An arbitrary legal capital amount assigned to shares
30What is the purpose of the Model Business Corporation Act?
To serve as a guide to states in developing corporation statutes