91Ó°ÊÓ

Joe, a student, asks your help in understanding some characteristics of a corporation. Explain each of these to Joe (a) Separate legal existence. (b) Limited liability of stockholders. (c) Transferable ownership rights.

What are the basic ownership rights of common stockholders in the absence of restrictive provisions?

A corporation has been defined as an entity separate and distinct from its owners. In what ways is a corporation a separate legal entity?

What are the two principal components of stockholders' equity?

The corporate charter of Gage Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first 2 years of operation, Gage sold 70,000 shares to shareholders and reacquired 4,000 of these shares. After these transactions, how many shares are authorized, issued, and outstanding?

For what reasons might a company like IBM repurchase some of its stock (treasury stock)?

Monet, Inc. purchases 1,000 shares of its own previously issued \(\$ 5\) par common stock for \(\$ 11,000\). Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders equity?

Indicate how each of these accounts should be classified in the stockholders' equity section of the balance sheet. (a) Common Stock. (b) Paid-in Capital in Excess of Par Value. (c) Retained Earnings. (d) Treasury Stock. (e) Paid-in Capital in Excess of Stated Value. (f) Preferred Stock.

What three conditions must be met before a cash dividend is paid?

Contrast the effects of a cash dividend and a stock dividend on a corporation's balance sheet.