Download Business Entities, Stock Transactions, and Investment Types with Journal Entries and more Quizzes Accounting in PDF only on Docsity!
Sole Proprietorship
one ownerUnlimited Liability Limited Life - end upon death or owner becomes incapacitatedTaxed at individual rates TERM 2
General Partnership
DEFINITION 2 At least two ownersUnlimited LiabilityLimited Life - end upon death or owners becomes incapacitatedTaxed at individual rates TERM 3
Limited Partnership
DEFINITION 3 At least 2 ownersUnlimited liability for general partners, limited for limited partner(s)Limited life - end upon death or owners becomes incapacitatedTaxed at individual rates TERM 4
Limited Liability Partnership
DEFINITION 4 At least 2 ownersUnlimited liability for general debts of the business but partners are protected from claims of negligence or malpractice committed by another partnerLimited life - end upon death or owners becomes incapacitatedTaxed at individual rate TERM 5
Limited Liability Company
DEFINITION 5 Owners are called membersLimited liabilityUnlimited lifeTaxed at individual rates
S
Corporation
Limited owners up to 100 shareholdersLimited LiabilityUnlimited LifeTaxed at individual rates TERM 7
C
Corporation
DEFINITION 7 Unlimited owners called shareholdersLimited LiabilityUnlimited LifeTaxed at corporate rate (double taxed on income and as owners on dividends) TERM 8
Authorized Stock
DEFINITION 8 stock that has a priority status over common stockholders in a corporation in one or more ways, such as dividends or distributing assets, is called TERM 9
Common Stock
DEFINITION 9 When all of the authorized shares have the same rights and characteristics, the stock is called TERM 10
Par Value of Stock
DEFINITION 10 refers to the arbitrary value assigned per share of stock by the corporate charter
Preferred stock -
noncumulative
confers no right to prior periods' unpaid dividends if they were not declared in those prior periods. (doesn't keep track of dividends) TERM 17
Rights of a stockholder
DEFINITION 17
- vote at stockholders' meetings (or register proxy votes electronically)2. sell or otherwise dispose of their stock3. purchase their proportional share of any common stock late issued by the corporation4. receive the dividend, if any, on each common share of the corporation5. share in any assets, remaining after creditors and preferred stockholders are paid when, and if, the corporation is liquidated. TERM 18
Advantage of
Corporation
DEFINITION 18 Separate legal entityLimited liability of stockholdersTransferable ownership rightsContinuous lifeLack of mutual agency for stockholdersEase of capital accumulation TERM 19
Disadvantage of Corporations
DEFINITION 19 Government regulationCorporate taxation TERM 20
Bond Discount
DEFINITION 20 occurs when a company issues bonds with a contract rate less than the market rate
Bond Premium
occurs when a company issues bonds with a contract rate higher than the market rate TERM 22
Par Value of Bonds
DEFINITION 22 also called face value or face amount, is paid at specified future date known as the bond's maturity date TERM 23
Advantages of bond financing
DEFINITION 23 Bonds do not affect owner controlInterest on bonds is tax deductible Bonds can increase return on equity TERM 24
Disadvantages of bonds
DEFINITION 24 Bonds can decrease return on equity Bonds require payment of both periodic interest and the par value at maturity Bond payments can be burdensome when income and cash flow are low TERM 25
Short-term investments
DEFINITION 25 They are securities that1. management intends to convert to cash within one year or the operating cycle, whichever is longer and,2. are readily convertible to cash
Controlling influence
Equity securities with controlling influenceConsolidation Reporting TERM 32
Journal entry - Sale of Stock @ par value
stock
DEFINITION 32 Mellor Corp issues 25,000 shares of common stock for $150,000 cash on February 20. Record journal entry if the stock has $2 par value.2/20 Cash $150,000 Common stock, $2 par $50,000 Additional PIC $100, TERM 33
Journal entry - Sale of Stock @ no par stock
with no stated value
DEFINITION 33 Mellor Corp issues 25,000 shares of common stock for $150,000 cash on February 20. Record the journal entry if the stock has neither par nor stated value.2/20 Cash $150,000 Common stock, no par $150, TERM 34
Journal entry - Sale of Stock @ no par stock
with stated value
DEFINITION 34 Mellor Corp issues 25,000 shares of common stock for $150,000 cash on February 20. Record the journal entry if the stock has a $5 stated value. 2/20 Cash $150, Common stock, $5 par $125,000 Additional PIC $25, TERM 35
Journal entry - Trading Securities @ Purchase
DEFINITION 35 Brooks Company purchases various investments in trading securities at a cost of $150,000 on December 27, 2013. Record entry to purchase trading securities on December 27,
- 12/27/13 Investment in Brooks - trading $150, Cash $150,
Journal entry - Trading Securities @ Dividend
Brooks Company purchases various investments in trading securities at a cost of $150,000 on December 27, 2013. At December 31, 2013, these securities had a fair value of $130,000. Record the 2013 year end adjusting entry for the trading securities portfolio.12/31/13 Unrealized loss (I/S) $20,000 F.V. Adj $20,000FV (130,000) - Cost (150,000) = 20, TERM 37
Journal entry - Trading Securities @ Sale
DEFINITION 37 Brooks Company purchases various investments in trading securities at a cost of $150,000 on December 27, 2013. At December 31, 2013, these securities had a fair value of $130,000. Assume that on December 31, 2014, the trading securities have a fair market value of $156,000. Prepare the adjusting entry for December 31, 2014.12/31/14 F.V. Adj $26,500 Unrealized gain (I/S) $26,500 FV (156,000) - Cost (150,000) = 6, TERM 38
Journal entry - Available for Sales @ Purchase
DEFINITION 38 On December 31, 2013, Chandler Company held the following short-term investments in its portfolio of Available for Sales securities. Chandler has no short-term investments in prior accounting periods. Prepare adjusting entry for December 31, 2013 to report these investments at fair value. Record the adjusting entry at December 31, 2013. 12/31/13 F.V. Adj $4, Unrealized gain OCI $4,800F.V (82,300) - Cost (77,500) = 4, TERM 39
Journal entry - Available for Sales @ Dividend
DEFINITION 39 On December 31, 2013, Chandler Company held the following short-term investments in its portfolio of Available for Sales securities. Chandler has no short-term investments in prior accounting periods. Prepare adjusting entry for December 31, 2013 to report these investments at fair value. The fair market value at December 31, 2014, is $85,000. Record the adjusting entry for December 31, 2014.12/31/14 F.V. Adj $2,700 Unrealized gain OCI $2,700F.V. (85,300) - Cost (77,500) = 7, TERM 40
Journal entry - Available for Sales @ Sale
DEFINITION 40 On December 31, 2013, Chandler Company held the following short-term investments in its portfolio of Available for Sales securities. Chandler has no short-term investments in prior accounting periods. Prepare adjusting entry for December 31, 2013 to report these investments at fair value.The fair market value at December 31, 2015 is $75,000. Record the adjusting entry for December 31, 2015.12/31/15 Unrealized gain OCI $7, Unrealized loss OCI $2,500 Cash $10,
