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- What are some advantages of the corporate form of organization?
- What is meant by limited liability of a corporation?
- What rights are attached to common shares? Where are these rights indicated?
- Describe a typical incorporation process.
- What is a board of directors and whom does it represent? Are the directors involved in the daily management of the entity?
- Describe:
- two main classes of shares that can be issued by a corporation; and
- the different terms relating to the status of a corporation’s shares.
- In what ways can shares be “preferred”? In which ways are they similar to common shares? Different from common shares?
- Describe the accounting treatment of reacquired shares.
- Why do corporations sometimes opt for a share split?
- Assume a 2-for-1 share split occurs. Explain
- the effect on the total number of issued and outstanding shares; and
- the effect on stated capital.
- Identify the major components of the shareholders’ equity section of a balance sheet. Why are these components distinguished?
- What are the main issues a board of directors considers when making a dividend declaration decision?
- Even if a corporation is making a substantial net income each year, why might the board of directors decide to not pay any cash dividends?
- Distinguish among the date of dividend declaration, the date of record, and the date of payment.
- Explain the different dividend preferences that may be attached to preferred shares. Why would preferred shares have these preferences over common shares? Does it mean that purchasing preferred shares is better than purchasing common shares?
- What are dividends in arrears? Are they a liability of the corporation?
- What does the book value of shares represent? How is it calculated?
- A corporate entity has both preferred and common classes of shares. How is the book value of common shares calculated in this case? What is meant by the liquidation value of preferred shares?
- Of what value is the calculation of book value per share?
- If the market price of a share is less than its book value; is it a bargain? Why or why not?
- (Appendix 1) What is the difference in accounting between cash dividends and share dividends? Give a sample journal entry for each.
- (Appendix 1) How does a share dividend differ from a share split?
- (Appendix 1) Does a share dividend change an investor’s percentage of corporate ownership? Explain, using an example.
- (Appendix 2) What is the difference between restricted and unrestricted retained earnings? Why would some retained earnings be restricted? Prepare the journal entries used to make a restriction.
- (Appendix 2) How can retained earnings be said to be reinvested in a corporation?
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