Chapter 11

Question 1

define authorized shares

Answer 1

of shares authorized to be sold

Question 2

Define Initial Public Offering (IPO)

Answer 2

The first time a corporation’s shares are offered to the public.

Question 3

Define Issued Shares

Answer 3

Authorized Shares sold

Question 4

Define Market Capitalization

Answer 4

multiply the number of shares issued by the share price at any different day.

Question 5

Define Contributed Capital

Answer 5

amount shareholders paid or contributed to the corporation in exchange for shares of ownership. Includes share capital.

Question 6

What are 4 reasons for the reacquisition

Answer 6

1. To increase trading of the company’s shares in the securities market in hope of enhancing the company’s value
2. To reduce the number of share issued
3. eliminate hostile shareholders by buying them out
4. To have additional shares available for issue to employees under bonus and stock compensation plans, or for use in acquiring other companies

Question 7

Define and list the journal entry of preferred shares

Answer 7

• special type of shares with dividend preference (must be given dividends before common shareholders) yet lack of voting rates

Dr: Cash
Cr: Preferred Shares

Question 8

Define Cash Dividends

Answer 8

Distribution of Cash to shareholders