ADM 1340 Lecture Notes - Lecture 11: Initial Public Offering, Dividend Yield, Retained Earnings

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16 Mar 2016

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A corporaion is a legal enity that is separate and disinct from its owners, who are known as shareholders. A public corporaion may have thousands of shareholders, and its shares are regularly traded on a securiies market. A private corporaion usually has only a few shareholders, it does not ofer its shares for sale to the general public. Separate legal existence: the corporaions acts under its own name rather than in the name of its shareholders. Limited liability of shareholders: creditors only have access to corporate assets to saisfy their claims, shareholders cannot be made to pay for the company"s liabiliies out of their personal assets. Transferable ownership rights: ownership of a corporaion is held in shares of capital, which are transferable units, the transfer of shares is up to the shareholder and does not need approval from the corporaion or other shareholders. Ability to acquire capital: a corporaion can acquire capital by issuing shares.

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Match the items below by entering the appropriate answer letter choice from the column provided on the right.

	1.Net income retained in the corporation.
	2. Creditors cannot go after stockholderâs personal assets to satisfy their claims.
	3. Retained earnings currently unavailable for dividends.
	4. A corporationâs own stock that has been reacquired by the corporation.
	5. Responsible to stockholders for corporate activity.
	6. The amount assigned to each share of stock in the corporate charter.
.	7. The date the board of directors formally declares the dividend and announces it to stockholders.
	8. A debit balance in retained earnings.
	9. Capital contributed by stockholders.
	10. The death of a stockholder or employee does not affect the going concern of the corporation.
	11. The company determines ownership of the outstanding shares for dividend purposes.
	12. Unit of ownership in a corporation.
-	13. This type of dividend for the stockholder results in more shares of stock, but no change in ownership interest.
	14. The issuance of additional shares of stock to stockholders accompanied by a reduction in the par or stated value per share. This stock transaction does not require an accounting entry.
	15. The acts of the owners (stockholders) do not bind the corporation.

A.	Par value
B.	Record date
C.	Retained Earnings
D.	Indefinite life
E.	Treasury stock
F.	Stock split
G.	Declaration date
H.	Retained Earnings restrictions
I.	Stock dividend
J.	Capital stock
K.	Deficit
L.	Paid-in capital
M.	Cash dividend
N.	Board of directors
O.	Separate legal entity
P.	Limited liability

lilachorse885

Match the items below by selecting the appropriate number in thespace provided.

Net income retained in the corporation.
The amount that must be retained in the business for theprotection of creditors.
Preferred stockholders have a right to receive current andunpaid prior-year dividends before common stockholders receive anydividends.
Creditors only have corporate assets to satisfy theirclaims.
Responsible to stockholders for corporate activity.
The amount assigned to each share of stock in the corporatecharter.
Unit of ownership in a corporation.
Enables stockholders to maintain their same percentageownership when new shares are issued.
Corporation's own stock that has been reacquired by thecorporation but not retired.
Total amount paid-in on capital stock.

1.	Limited liability
2.	Capital stock
3.	Board of directors
4.	Paid-in capital
5.	Retained earnings
6.	Preemptive right
7.	Par value
8.	Legal capital
9.	Treasury stock
10.	Cumulative feature

pearzebra975

Regulations are

	A. equal in authorityto legislation if statutory
	B. equal in authorityto legislation
	C. presumed to bevalid and to have almost the same weight as the IRC
	D. equal in authorityto legislation if interpretative

2) Which of the followingstatements regarding proposed regulations is not correct?

	A. Practitioners andother interested parties may comment on proposed regulations.
	B. Proposedregulations expire after 3 years.
	C. Proposed andtemporary regulations are generally issued simultaneously.
	D. Proposedregulations do not provide any insight into the IRS'sinterpretation of the tax law.

3) Identify which of thefollowing statements is false.

	A. Members from boththe House and the Senate are on the Conference Committee.
	B. When tax advisorsspeak of the tax law, they usually have in mind just the InternalRevenue Code.
	C. Records ofcommittee hearings are helpful in determining Congressionalintent.
	D. All arefalse.

4) Which of the followingstatements about a partnership is true?

	A. Partners are taxedon distributions from a partnership.
	B. A partnership is ataxpaying entity.
	C. Partners are taxedon their allocable share of income whether it is distributed ornot.
	D. Partners areconsidered employees of the partnership.

5) Which of the followingstatements is incorrect?

	A. The number of Scorporation shareholders is unlimited.
	B. S corporationsmust allocate income and expenses to their shareholders based ontheir proportionate ownership interest.
	C. S corporationincome is taxed to shareholders when earned.
	D. S corporationlosses can offset shareholder income from other sources.

6) Which of the followingstatements is incorrect?

	A. Limited partners'liability for partnership debt is limited to their amount ofinvestment.
	B. In a generalpartnership, all partners have unlimited liability for partnershipdebts.
	C. In a limitedpartnership, all partners participate in managerialdecision-making.
	D. All of thestatements are correct.

7) Three members form an LLC inthe current year. Which of the following statements is incorrect?

	A. The LLC can electto have its default classification ignored.
	B. The LLC's defaultclassification under the check-the-box rules is as apartnership.
	C. The LLC can electto be taxed as a C corporation with no special taxconsequences.
	D. If the LLC electsto use its default classification, it can elect to change itsstatus to being taxed as a C corporation beginning with the thirdtax year after the initial classification.

8) Identify which of thefollowing statements is false.

	A. Under thecheck-the-box regulations, an LLC that has only two members(owners) must be taxed as a partnership.
	B. The check-the-boxregulations permit an LLC to be taxed as a C corporation.
	C. A business neednot be incorporated under state or federal law to be taxed as acorporation.
	D. Once an electionis made to change its classification, an entity cannot change againfor 60 months.

9) Identify which of thefollowing statements is true.

	A. The check-the-boxregulations permit an LLC to be taxed as a C corporation.
	B. Under thecheck-the-box regulations, an LLC that has only two members(owners) default classification is as a partnership.
	C. Once an electionis made to change its classification, an entity cannot change againfor 60 months.
	D. All of thestatements are true.

10) For Sec. 351 purposes theterm property does not include

	A. accountsreceivable
	B. cash
	C. inventory
	D. servicesrendered

11) Identify which of thefollowing statements is true.

	A. The exchange ofstock for services rendered is not a taxable transaction.
	B. The repeal of Sec.351 would result in more existing businesses beingincorporated.
	C. Section 351 wasenacted to allow taxpayers to incorporate without incurring adversetax consequences.
	D. All arefalse.

12) Barry, Dan, and Edithtogether form a new corporation; Barry and Dan each contributeproperty in exchange for stock. Within 2 weeks after the formation,the corporation issues additional stock to Edith in exchange forproperty. Barry and Dan each hold 10,000 shares and Edith willreceive 9,000 shares. Which transactions will qualify fornonrecognition?

	A. Only the secondtransaction will qualify for nonrecognition.
	B. Only the firsttransaction will qualify for nonrecognition.
	C. Because of thestep transaction doctrine neither transaction will qualify.
	D. Both transactionswill qualify under Sec. 351 if they are part of the same plan ofincorporation.

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ADM 1340 Lecture Notes - Lecture 11: Initial Public Offering, Dividend Yield, Retained Earnings

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