ADVANCED ACCOUNTING COMPREHENSIVE UPDATED
QUESTIONS AND ANSWERS SURE A+
✔✔Public Offering - ✔✔Sale of stock to the public through regulated markets.
✔✔Private Equity Financing - ✔✔Stock issued to private investors rather than the
public.
✔✔Ownership in Stock - ✔✔Both preferred and common shareholders have ownership
interest.
✔✔Common Stock - ✔✔Voting equity with potential dividends and residual claims.
✔✔Preferred Stock - ✔✔Equity with fixed dividends and priority claims, usually without
voting rights.
✔✔Voting Rights - ✔✔Common stockholders typically have voting rights.
✔✔Dividends on Preferred Stock - ✔✔Fixed percentage dividend, usually paid before
common dividends.
✔✔Dividends on Common Stock - ✔✔Variable and only paid if declared by the board.
✔✔Earnings Claim Priority - ✔✔Preferred shareholders have first claim on earnings.
✔✔Common Shareholder Priority - ✔✔Common shareholders are paid after creditors
and preferred shareholders.
✔✔Capital Stock - ✔✔The portion of equity arising from issuing shares.
✔✔Stated Value - ✔✔A declared value assigned to stock when no par value exists.
✔✔Stock Issuance at Stated Value - ✔✔Shares issued at their stated value with no
premium.
✔✔Journal Entry: Stock Issued at Stated Value - ✔✔Debit Cash; Credit Common Stock.
✔✔Stock Issuance at a Premium - ✔✔Shares issued for more than par or stated value.
✔✔Paid-In Capital over Stated Value - ✔✔The equity account that records stock
issuance above stated or par value.
✔✔Journal Entry: Stock Issued at Premium - ✔✔Debit Cash; Credit Common Stock;
Credit Paid-In Capital.
, ✔✔Noncash Stock Issuance - ✔✔Stock issued in exchange for assets instead of cash.
✔✔Preferred Stock for Assets - ✔✔Preferred shares issued to acquire equipment or
inventory.
✔✔Journal Entry: Preferred Stock for Assets - ✔✔Debit Asset Accounts; Credit
Preferred Stock; Credit Paid-In Capital.
✔✔Dividends - ✔✔A distribution of earnings to shareholders.
✔✔Dividend Declaration - ✔✔A legal obligation created when dividends are announced.
✔✔Dividend Payment - ✔✔The distribution of cash to shareholders.
✔✔Preferred Dividend - ✔✔Base dividend that must be paid before common dividends.
✔✔Preferred Dividend Calculation - ✔✔Par or stated value × dividend rate ÷ payment
periods.
✔✔Dividend Distribution Priority - ✔✔Preferred dividends are paid before common
dividends.
✔✔Journal Entry: Dividend Declaration - ✔✔Debit Dividend Expense; Credit Dividends
Payable.
✔✔Journal Entry: Dividend Payment - ✔✔Debit Dividends Payable; Credit Cash.
✔✔Fixed-Income Transactions - ✔✔Accounting activities involving debt instruments
with fixed returns.
✔✔Debt Financing - ✔✔Raising capital by borrowing rather than selling equity.
✔✔Examples of Debt Instruments - ✔✔Bonds, notes, debentures, and loans.
✔✔Key Feature of Fixed Income - ✔✔Fixed interest payments and repayment of
principal.
✔✔Balance Sheet Classification - ✔✔Debt instruments are recorded as liabilities.
✔✔Interest Expense - ✔✔Cost of borrowing shown on the income statement.
✔✔Bond - ✔✔A long-term debt security with fixed interest payments.
QUESTIONS AND ANSWERS SURE A+
✔✔Public Offering - ✔✔Sale of stock to the public through regulated markets.
✔✔Private Equity Financing - ✔✔Stock issued to private investors rather than the
public.
✔✔Ownership in Stock - ✔✔Both preferred and common shareholders have ownership
interest.
✔✔Common Stock - ✔✔Voting equity with potential dividends and residual claims.
✔✔Preferred Stock - ✔✔Equity with fixed dividends and priority claims, usually without
voting rights.
✔✔Voting Rights - ✔✔Common stockholders typically have voting rights.
✔✔Dividends on Preferred Stock - ✔✔Fixed percentage dividend, usually paid before
common dividends.
✔✔Dividends on Common Stock - ✔✔Variable and only paid if declared by the board.
✔✔Earnings Claim Priority - ✔✔Preferred shareholders have first claim on earnings.
✔✔Common Shareholder Priority - ✔✔Common shareholders are paid after creditors
and preferred shareholders.
✔✔Capital Stock - ✔✔The portion of equity arising from issuing shares.
✔✔Stated Value - ✔✔A declared value assigned to stock when no par value exists.
✔✔Stock Issuance at Stated Value - ✔✔Shares issued at their stated value with no
premium.
✔✔Journal Entry: Stock Issued at Stated Value - ✔✔Debit Cash; Credit Common Stock.
✔✔Stock Issuance at a Premium - ✔✔Shares issued for more than par or stated value.
✔✔Paid-In Capital over Stated Value - ✔✔The equity account that records stock
issuance above stated or par value.
✔✔Journal Entry: Stock Issued at Premium - ✔✔Debit Cash; Credit Common Stock;
Credit Paid-In Capital.
, ✔✔Noncash Stock Issuance - ✔✔Stock issued in exchange for assets instead of cash.
✔✔Preferred Stock for Assets - ✔✔Preferred shares issued to acquire equipment or
inventory.
✔✔Journal Entry: Preferred Stock for Assets - ✔✔Debit Asset Accounts; Credit
Preferred Stock; Credit Paid-In Capital.
✔✔Dividends - ✔✔A distribution of earnings to shareholders.
✔✔Dividend Declaration - ✔✔A legal obligation created when dividends are announced.
✔✔Dividend Payment - ✔✔The distribution of cash to shareholders.
✔✔Preferred Dividend - ✔✔Base dividend that must be paid before common dividends.
✔✔Preferred Dividend Calculation - ✔✔Par or stated value × dividend rate ÷ payment
periods.
✔✔Dividend Distribution Priority - ✔✔Preferred dividends are paid before common
dividends.
✔✔Journal Entry: Dividend Declaration - ✔✔Debit Dividend Expense; Credit Dividends
Payable.
✔✔Journal Entry: Dividend Payment - ✔✔Debit Dividends Payable; Credit Cash.
✔✔Fixed-Income Transactions - ✔✔Accounting activities involving debt instruments
with fixed returns.
✔✔Debt Financing - ✔✔Raising capital by borrowing rather than selling equity.
✔✔Examples of Debt Instruments - ✔✔Bonds, notes, debentures, and loans.
✔✔Key Feature of Fixed Income - ✔✔Fixed interest payments and repayment of
principal.
✔✔Balance Sheet Classification - ✔✔Debt instruments are recorded as liabilities.
✔✔Interest Expense - ✔✔Cost of borrowing shown on the income statement.
✔✔Bond - ✔✔A long-term debt security with fixed interest payments.
