Chapter 13 Study Guide

Chapter 13 Study Guide - CHAPTER 13 Corporations...

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CHAPTER 13 Corporations: Organization and Capital Stock Transactions STUDY OBJECTIVES 1. IDENTIFY THE MAJOR CHARACTERISTICS OF A CORPORATION. 2. DIFFERENTIATE BETWEEN PAID-IN CAPITAL AND RETAINED EARNINGS. 3. RECORD THE ISSUANCE OF COMMON STOCK. 4. EXPLAIN THE ACCOUNTING FOR TREASURY STOCK. 5. DIFFERENTIATE PREFERRED STOCK FROM COMMON STOCK. 6. PREPARE A STOCKHOLDERS’ EQUITY SECTION.
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CHAPTER REVIEW The Corporate Form of Organization 1. (S.O. 1) A corporation is an entity created by law that is separate and distinct from its owners and its continued existence is dependent upon the corporate statutes of the state in which it is incorporated. 2. The characteristics that distinguish a corporation from proprietorships and partnerships are: a. The corporation has separate legal existence from its owners. b. The stockholders have limited liability. c. Ownership is shown in shares of capital stock, which are transferable units. d. It is relatively easy for a corporation to obtain capital through the issuance of stock. e. The corporation can have a continuous life. f. The management in the corporation’s organizational structure is at the discretion of the board of directors who are elected by the stockholders. g. The corporation is subject to numerous government regulations. h. The corporation must pay an income tax on its earnings, and the stockholders are required to pay taxes on the dividends they receive: the result is double taxation of distributed earnings. Forming a Corporation 3. The formation of a corporation involves (a) filing an application with the Secretary of State, (b) paying an incorporation fee, (c) receiving a charter (articles of incorporation), and (d) developing by-laws. a. Costs incurred in forming a corporation are called organization costs. b.
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This note was uploaded on 10/10/2011 for the course ACCOUNTING 510 taught by Professor Havens during the Spring '11 term at Davenport.

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Chapter 13 Study Guide - CHAPTER 13 Corporations...

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