Acct 221 1st Edition Lecture 22 Outline of Last Lecture 1 Bonds a How to calculate issue price b Selling bonds c Amortization schedule Outline of Current Lecture 1 Common Stock a Issuing par value stock b Types of Shares 2 Treasury Stock 3 Cash Dividends 4 Stock Split Current 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 Shares These 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 affected
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