Accounting Homework
Assignment – APA and References Needed
Write a 250- to 350-word paper explaining why preferred stock is referred to as preferred and what some of the features added to preferred stock are that make it more attractive to investors. Would you select preferred stock or common stock as an investment? Why?
Format your paper consistent with APA guidelines.
Accounting Discussion Questions ( no min word count, does not need to be in APA format)
1. The Corporate Form of Business
- Why does a company choose to form as a corporation and how is corporation formed? What are the advantages and disadvantages of the corporate form of doing business?
- What are the different types of dividends corporations may issue and when should dividends be paid? Do you prefer a stock dividend or a cash dividend? Why?
- Why do corporations buy back their own stock and how is this “buy-back” accounted for?
2. Video
- Summarize at least two of the types of stockholders equity transactions illustrated in the video.
- Develop an additional example of a stockholders equity transaction. Describe the transaction in words and then illustrate the transaction as it would appear in the General Journal.
3. Dividends
- What three conditions must exist before a cash dividend is paid? Contrast the effects of a cash dividend and a stock dividend on a corporation’s balance sheet.
- Why must preferred stock dividends be subtracted from net income in computing earnings per share?
- Why is common stock usually not issued at a price that is less than par value?
4. Investments
- What are the reasons that corporations invest in securities?
- Coffey Corporation purchased debt investments for $52,000 on January 1, 2011. On July 1, 2011, Coffey received cash interest of $2,340. Journalize the purchase and the receipt of interest. Assume that no interest has been accrued.
- On August 1,Wade Company buys 1,000 shares of Morgan common stock for $35,000 cash, plus brokerage fees of $700. On December 1,Wade sells the stock investments for $40,000 in cash. Journalize the purchase and sale of the common stock.
Answer preview
1.A company prefers to form as a corporation to shield itself from both financial and legal liabilities. It has an implication that there is no personal liability for the assets and debts of the company.
There are steps that have to be adhered to in the formation of a corporation. An available business name must be chosen……………………………
2.Preferred stock is referred to as preferred because stockholders receive preferential treatment in comparison to common stock. The special or preferential treatment includes the guaranteed dividends that are paid to the common stockholders. At the same time, in case a company goes bankrupt, preferred stockholders are given the first consideration for the payouts of the assets of a company……………………………………..