Questions and Answers
What type of sources does comprehensive income originate from?
nonowner
The ownership interests of the investors in a corporation are referred to as?
Shareholders' equity
Which of the following are sources of shareholders' equity? (Select all that apply)
Which of the following accounts are classified as shareholders' equity?
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When investors purchase shares of stock from a corporation, it is recorded by the corporation as investments in securities.
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______ include(s) all changes in equity during a period except those resulting from investments by owners and distributions to owners.
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How is retained earnings typically reported on the balance sheet?
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What accurately describes shareholders' equity?
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Shares of stock previously sold by the corporation that are repurchased are called?
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Shareholders' equity consists of which of the following items? (Select all that apply)
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Which of the following items are included in other comprehensive income? (Select all that apply)
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Which account is a stockholders' equity account?
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When investors purchase shares of stock, it is classified as?
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Match the financial statement with respect to the reporting of stockholders' equity.
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Amounts earned by the corporation on behalf of its shareholders are referred to as?
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How should cash dividends be reported on the statement of shareholders' equity?
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Treasury stock represents investments in treasury securities of the U.S. government.
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Shareholders' equity is classified under IFRS into two categories: share capital and _____.
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Which of the following items are included in other comprehensive income? (Select all that apply)
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What is the most important advantage to the corporate form of business?
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Which of the following accounts are classified as shareholders' equity?
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Corporations raise capital by?
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The balance sheet should disclose the sources of changes in the stockholders' equity accounts.
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Which of the following is subject to double taxation?
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A company has available-for-sale debt securities in its portfolio that have increased in value at year-end. How should the unrealized gain on the available-for-sale securities be reported on the statement of shareholders' equity?
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What type of corporations include churches, hospitals, universities, and charities?
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Study Notes
Comprehensive Income and Shareholders' Equity
- Comprehensive income reflects changes in equity from nonowner sources, excluding those from owner transactions.
- Shareholders' equity represents the ownership interests of investors in a corporation.
Sources and Components of Shareholders' Equity
- Sources of shareholders' equity include retained earnings and paid-in capital.
- Key components classified as shareholders' equity:
- Preferred stock
- Additional paid-in capital
- Net unrealized holding gains on investments
Recording Transactions and Definitions
- Purchase of stock by investors is recorded as paid-in capital, not investments in securities.
- Comprehensive income encompasses all equity changes during a period, except those from owner investments or distributions.
- Retained earnings are reported as a single amount on the balance sheet.
Stock and Treasury Stock
- Shares repurchased by a corporation are termed treasury stock.
- Shareholders' equity consists of investments made by shareholders and amounts earned by the corporation.
Other Comprehensive Income
- Other comprehensive income includes:
- Gains and losses from postretirement program amendments
- Net holding gains and losses on certain investments
- Deferred gains and losses on derivatives
- Adjustments from foreign currency translations
Financial Statements and Equity Reporting
- The balance sheet displays shareholders' equity amounts at the reporting period's end.
- The statement of stockholders' equity outlines sources of changes in equity accounts.
- Cash dividends are reported as reductions in retained earnings on the statement of shareholders' equity.
Corporate Structure and Taxation
- Treasury stock does not represent investments in government treasury securities; it refers to previously issued stock that is repurchased.
- Under IFRS, shareholders' equity is categorized into share capital and reserves.
- Corporations face double taxation, as both corporate income and shareholder dividends are taxed.
Capital Raising and Corporate Advantages
- Corporations raise capital by issuing stock, issuing debt, and operating at a profit.
- The primary advantage of the corporate structure is limited liability for investors.
Classification of Corporations
- Not-for-profit corporations include organizations such as churches, hospitals, universities, and charities.
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Test your knowledge on key concepts from Chapter 18 of Accounting. These flashcards cover the definition and sources of comprehensive income and shareholders' equity. Perfect for reviewing important financial terms and principles!
