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STOCKHOLDERS’ EQUITY: PAID-IN CAPITAL Lecture # 13

Chapter 11. STOCKHOLDERS’ EQUITY: PAID-IN CAPITAL Lecture # 13. Stockholders’ Equity of a Corporation. Authorization and Issuance of Capital Stock. Authorized Shares. The maximum number of shares of capital stock that can be sold to the public. .

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STOCKHOLDERS’ EQUITY: PAID-IN CAPITAL Lecture # 13

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  1. Chapter11 STOCKHOLDERS’ EQUITY: PAID-IN CAPITAL Lecture # 13

  2. Stockholders’ Equity of a Corporation

  3. Authorization and Issuanceof Capital Stock Authorized Shares The maximum number of shares of capital stock that can be sold to the public.

  4. Issued shares are authorized shares of stock that have been sold. Unissued shares are authorized shares of stock that never have been sold. Authorization and Issuanceof Capital Stock Authorized Shares Usually shares are sold through an underwriter.

  5. Authorization and Issuanceof Capital Stock Authorized Shares Outstanding shares are issued shares that are owned by stockholders. Outstanding Shares Unissued Shares Issued Shares Treasury shares are issued shares that have been reacquired by the corporation. Treasury Shares

  6. Stockholders’ Equity Par value is an arbitrary amount assigned to each share of stock when it is authorized. Market price is the amount that each share of stock will sell for in the market.

  7. All proceeds credited to Common Stock Treated like par value common stock Stockholders’ Equity Common stock can be issued in three forms: Par Value Common Stock No-Par Common Stock Stated Value Common Stock Let’s examine this form of stock.

  8. Issuance of Par Value Stock Record: The cash received. The number of shares issued × the par value per share in the Common Stockaccount. The remainder is assigned to Contributed Capital in Excess of Par. Prepare the journal entry to record an issuance of 10,000 shares of $2 par value stock for $25 per share which occurred on September 1, 2005.

  9. Issuance of Par Value Stock The journal entry to record an issuance of 10,000 shares of $2 par value stock for $25 per share on September 1, 2005, should include a credit to common stock for the par value of the shares issued.

  10. Issuance of Par Value Stock

  11. A separate class of stock, typically having priority over common shares in . . . Dividend distributions (rate is usually stated). Distribution of assets in case of liquidation. Preferred Stock Other Features Include: Cumulative dividend rights. Usually callable by the company. Normally has no voting rights.

  12. Cumulative Vs. Noncumulative Cumulative Preferred Stock Dividends in arrears must be paid before dividends may be paid on common stock. Undeclared dividends from current and prior years do not have to be paid in future years.

  13. Stock Preferred as to Dividends Example: Consider the following partial Statement of Stockholders’ Equity. During 2004, the directors declare cash dividends of $5,000. In year 2005, the directors declare cash dividends of $42,000.

  14. Stock Preferred as to Dividends Example: Consider the following partial Statement of Stockholders’ Equity. During 2000, the directors declare cash dividends of $5,000. In year 2001, the directors declare cash dividends of $42,000.

  15. Gee, I can’t do that with MY preferred stock! Other Features of Preferred Stock I just converted 100 shares of preferred stock into 1,000 shares of common stock and ended up with a higher dividend yield! Some preferred stock is convertible into shares of common stock.

  16. Preferred Stock

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