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UMass Amherst ACCOUNTG 221 - Common and Treasury Stock

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Acct. 221 1st Edition Lecture 22Outline of Last Lecture 1. Bondsa. How to calculate issue price b. Selling bondsc. Amortization schedule Outline of Current Lecture 1. Common Stocka. Issuing par value stock b. Types of Shares2. Treasury Stock3. Cash Dividends4. Stock SplitCurrent Lecture Common Stock Issuing par value stock Ex. 1. Nelson, Inc. issued 100 shares of $10 par value stock for $22 per share- Credit Common Stock 1,000 (# of shares (100) * par value ($10) )- Debit Cash 2200 (# of shares (100) * market rate ($22) )- Credit Paid in Capital – In Excess of Par 1200 (2200-1000 = 1200) Authorized, Issues, and Outstanding Capital Stock Authorized Shares- Maximum number of shared of capital stock that can be sold to the public  Issued SharesThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Authorized shares of stock that have been sold- Once issued always issued*- 2 types: Outstanding Shares Public owns  Treasury Shares Company owns  Company can buy back own shares  Unissued Shares- Authorized shares of stock that have never been sold  Treasury Stock Issued shares that are bought back by the company  Contra equity account No voting or dividend rights Why buy back own stock? Employee stock option plans Preparation for a merger To increase earnings per share Supporting the stock price To avoid a hostile takeover  When buying treasury stock: Bought back at what it costs us  Credit cash at cost Debit treasury stock at cost  Cash Dividends Declaration date Record liability for dividend- Credit Dividends Payable- Debit Dividends Date of Record No entry required Payment Date Record payment of cash to stockholders - Credit cash- Debit dividends payable  Stock Split Replace existing shares with a greater number of new shares Used to reduce the market price per share of their stock The number of outstanding shared increase and par value decreased proportionally Retained earnings sis not


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