Chapter 11 Stockholder s Equity paid in capital capital contributed by stockholders and retained earnings earned capital net income Charter states of shares of stock a corporation is authorized Corporations separate legal entities have a continuous life raise a large amount of capital ownership rights are easily transferable limited liability to stockholders BUT has corporate management cost of govt regulations double taxation of dividends Corporations can reacquire stock that is issued that that is left with stockholders is called outstanding stock Treasury stock shares purchased and held by the company Outstanding shares issued shares treasury stock Par value random amount assigned to each share of stock Market value amount share of stock will sell for in the market Par value does NOT equal market value Issuing shares of common stock of par for cash ex issued 1000 shares of common stock 1 par ex issued 1000 shares of 1 par common stock for 70 per Cash 1000 Common stock 1000 share Cash 70 000 Common stock Paid in Capital 1000 69 000 When you issue common stock you debit cash the amount per share times the of shares credit common stock for the par x amount of shares and credit paid in capital the remainder Issuing shares of stock for services buildings land equipment ex exchange 4000 shares of 4 par common stock for a building whose market value is 80000 80 000 Building Common stock Paid in capital in excess of par C S 64000 16 000 ex billed company 50 000 for services agree to accept 5000 shares of 1 par value in payment of bill no established market price for stock Organizational Expense Asset 50 000 Common Stock Paid in Capital in excess of par C S 5000 45000 Issuing no par common stock for cash ex issued 1000 shares of no par common stock for 18 per share 180 000 Common Stock 180 000 Cash vs Cash ex no par stock assigned a value of 5 per share 180 000 Common Stock Paid in Capital in excess of stated value 130 000 5000 If you have stock you can vote in matters concerning the company share in distributions of earnings and share in assets upon liquidation Don t forget Common stock and Paid in Capital are both SE Equity Paid in Capital and Retained Earnings Paid in Capital Common Stock or Preferred Stock which both paid in capital in excess of par Preferred stock can be cumulative or non cumulative Cumulative dividends in arrears must be paid before dividends may be paid on common stock Ex 1000 shares of 4 stock cumulative preferred stock 4000 shares of common stock 15 par 22 000 in dividends in 2014 no dividends are paid in 2012 2013 Preferred 1000x4 for each year 12000 Common the 10 000 left Divide by shares to get how much each one receives 12 000 1000 12 vs 10 000 4000 2 50 Common types of dividends are cash and stock dividends Dividend Announcements Date of declaration Cash Dividends Dividends Payable xxx xxx Liability goes up and equity goes down Date of payment Dividends payable Cash xxx xxx Liability goes down assets go down no effect on Equity Corps issue stock dividends to satisfy stockholders dividend expectations without spending cash results in decrease in retained earnings and increase in paid in capital Ex 50 000 shares issued and outstanding par value is 10 per share market value is 15 per share Journal to declare a 10 stock dividend Stock dividends 50 000x10 5000sharesx 15 75000 Stock dividends distributable Paid in Capital 75000 50 000 25 000 Journal when stocks are issued Common stock dividends distributable Common Stock 50 000 50 000 Treasury stock is corporation s own stock that is has reqacquired from shareholders but not retired debit for price paid to reacquire it is a contra stockholder s equity account purchase reduces SE Ex Purchase 1 000 shares of its own 1 par common stock for 8 per share Treasury Stock common Cash 8000 8000 Ex Reissued 500 shares of treasury stock originally purchased for 8 a share for 12 per share Cash 6000 12x500 Treasury Stock Paid in Capital TS 2000 4000 8x500 Ex Reissued 300 shares of treasury stock originally purchased for 8 per share for 3 a share 900 300x 3 Cash Paid in Capital 1500 Treasury Stock 2400 300x 8 Ex Reissued remaining 200 shares of TS originally bought for 8 per share for 1 per share 200 200x 1 Cash Paid in Capital 500 Retained Earnings 900 Treasury Stock 1600 8x200 Stock splits reduce par and issues a proportionate number of additional shares Earnings per share NI Preferred Dividends Average number of Common Shares Outstanding
View Full Document
Unlocking...