Directions: Number your answers and answer in complete sentences. 1. What are th
ID: 2783370 • Letter: D
Question
Directions: Number your answers and answer in complete sentences.
1. What are the two categories of Stockholder's Equity on the balance sheet?
2. What is the difference between the two categories?
3. What are the two classes of stock in a corporation?
4. Which class of stock is listed first? Why?
5. What is par value? Stated value?
6. What happens to the amount of cash that is invested in a corporation over the par/stated value?
7. What is treasury stock?
8. Explain the difference between authorized stock, issued stock, and outstanding stock.
9. What does a corporation have to do if it is incorporated in one state, but wants to carry out business in another?
10. What are the characteristics of the corporate form of business?
Explanation / Answer
Answer(1)- Two categories of Stockholder's equity in balance sheet:
Paid in capital- It is the amount of investors that company raised. It is the amount, paid by shareholders at the time of issuance of common and preferred stocks.
Retained earnings- This is the amount of profit, retained by company and not distributed among the shareholders.
Answer(3)- Two classes of stocks-
Class A- It is the classification of common stocks. It has more voting rights
Class B- Shares of this class are given to the management. It has less voting right.
Two categories of stocks are- Preferred and Common stock
Answer(4)- Preferred stocks are listed first in the stockholder's equity section on the company's balance sheet.
Answer(5)- Par Value- Par value of share is the value that is stated in the company's Charter and memorandum. It is also called face value that is stated on the stock certificate.
Answer(7)- Treasury Stock- It is the part of shares that company keeps for treasury purpose. These shares neither pay dividend nor have voting rights. These shares are the shares that were previously issued and are later repurchased from the stockholders.
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