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UA ACCT 200 - Stockholders Equity I

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ACCT 200 1st Edition Lecture 20 Outline of Last Lecture I. BE 9-9II. BE 9-10III. Installment NotesIV. BE 9-17V. E 9-16VI. Selling Stocks Vs. BondsVII. BE 9-18Outline of Current Lecture I. Public vs. Private CorporationsII. Stockholders’ RightsIII. Advantages/Disadvantages of a CorporationIV. Types of Common StockV. BE 10-4VI. Preferred StockholdersVII. BE 10-5VIII. Treasury StockIX. BE 10-8X. Retained EarningsXI. MiscellaneousXII. BE 10-10XIII. Stock DividendsXIV. Stock SplitsXV. BE 10-12Current Lectureprivate corporations – can’t become a shareholder just by contacting a broker like you can for public corporationsright to receive dividends – only if company declares themknow corporations advantages and disadvantagesShareholders aren’t affected if a corporation is suedBanks are less likely to lend to a sole proprietorship (hardly ever)know definitions of types of common stockAuthorized shares: 10,000Issued shares: 9000Treasury shares: 500 (company bought its own shares back)Outstanding shares=9000-500=8500 sharesBE 10-4issue 1000 shares of $1 par value stock for $20 per shareJournal entry:Cash 20,000 common stock 1000 (par value*shares issued) additional paid in capital 19,000 (total cash-amt in common stock)preferred stockholders give up their right to voteBE 10-5issue 1000 shares of $.01 preferred stock for $22 per shareCash 22,000 preferred stock 10 additional paid in capital 21,990treasury stock – contra (negative) equity account; credit cashon test: will have numbers without brackets, have to find total equity by adding com stk, additional paid in capital, and retained earnings, then subtracting treasury stockBE 10-8company has 1000 shares issued to shareholdersDuring the year, company repurchases its own stock – 100 shares at $28Record transaction (should know it’s a treasury transaction)Treasury stock 2800 cash 2800Effect on accounting equation:Decreases asset (cash), decreases equityTreasury stock doesn’t issue dividendsaccumulated deficit=negative retained earningstreasury stock – balance sheetNotes payable – balance sheetInterest expense – income statementDividends – only found in one place (statement of stockholder’s equity)Cash – balance sheetDividends payable – balance sheetInterest income – income statementDividends: usually paid in cash but don’t have to be; can be property occasionally Have to give investors the same amount of money per share3 important dates:Declaration (set up liability), record (no journal entry), payment (pay off liability)BE 10-103000 shares of common stock outstandingDeclare a $.50 dividend on Oct 1Date of record is Oct 15Payment date is Oct 31Record all appropriate journal entries:Declaration date 10/1Dividends 1500 dividends payable 1500(liabilities increasing, equity decreasing)Record date 10/15 – no journal entryPayment date 10/31Dividends payable 1500 cash 1500(assets and liabilities decreasing)Stock dividend1000 shares in company, you own 100 shares20% stock dividend for the companyCompany will issue 1000*.2=200 more sharesAfter the stock dividend – 1200 shares outstanding for the companyYou (100 shares):10% ownership so you will get 10% of the new stock shares from the dividend200*.10=20 new sharesAfter the stock dividend you own 120 sharesBefore the stock dividend you have 100/1000=10%After the stock dividend you have 120/1200=10%Ownership % will not change after the stock dividendstock split: changes par value of stock, changes number of shares issued and outstanding5 for 1 split:100,000 shares, $5 par valueAfter split: 100,000*5=500,000 shares/5=$1 par value BE 10-1220,000 shares of stock issued and outstanding, $1 par value, market price is $25If they do a 2 for 1 split, what is the information after the split?40,000 shares issued and outstanding$.50 par value$12.50 market


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UA ACCT 200 - Stockholders Equity I

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