Author Question: No allowance account is used with the direct write-off method. a. True b. False Indicate ... (Read 363 times)

kwoodring · **on:** Jul 5, 2018

No allowance account is used with the direct write-off method.
a. True
b. False

Indicate whether the statement is true or false

Question 2

Marcy's Catering has been so successful that the business needs to expand its facility. Marcy has decided to change the business from a sole proprietorship to a corporation in order to raise more money from the sale of stock to investors.

Marcy's accountant has prepared a proposed shareholders' equity section of the balance sheet. Explain to Marcy what each line item represents.

Shareholders' equity:
Paid-in capital:
Preferred stock
Common stock
Additional paid-in capital
Treasury stock
Retained earnings
Total shareholders equity
What will be an ideal response?

mfedorka · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

True

Answer to Question 2

The owners' claims to the assets of a corporation are called shareholders' equity or stockholders' equity. There are two parts to shareholders' equity: contributed capital and retained earnings. Contributed capital, or paid-in capital, is the amount owners have invested in the corporation. Paid-in capital is further divided into capital stock and additional paid-in capital. Stock can be either preferred stock or common stock. Owners of preferred stock receive preference rights on the distribution of dividends; however, they have no voting rights. Owners of common stock have the right to participate in the distribution of dividends and the right to vote for members of the board of directors. Additional paid-in capital represents the difference between the par value of the corporation's stock and the market price at which the stock was issued. Treasury stock is corporate stock that has been issued and later repurchased by the corporation. Retained earnings represent the total net income minus dividends since the day the corporation began.