ACCT_3280_S12_Week_3_Notes_Chapter_16 - ACCT 3280...

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ACCT 3280 – INTERMEDIATE ACCOUNTING I WEEK 3 NOTES – CORPORATE REPORTING Introduction: This lesson begins by describing share transactions that affect the calculation of earnings per share, which is included in as part of the corporate income statement. This information helps management and investors understand current and past transactions and to predict future performance. The lesson continues with an exploration of additional income information and special issues regarding the statement of changes in equity. Learning Objectives: 1. Describe and account for share dividends and share splits. 2. Describe and account for retirement of shares. 3. Calculate earnings per share and describe its use. 4. Explain the form and content of a comprehensive corporate income statement. 5. Explain the items reported in retained earnings. Lesson Notes: I. Additional Share Transactions A. Share dividends—distribution of additional shares to shareholders without receipt of any payment in return.(also called stock dividends) Reasons for share dividends include: 1. Keep market price of the shares affordable 2. Conserve cash for business expansion. 3. Provides evidence of management’s confidence that the company is doing well. Transfers a portion of equity from retained earnings to contributed capital (capitalizes retained earnings). The market value of the shares to be distributed is capitalized. Entries—do not affect a corporation’s assets or total shareholders’ equity. Date of Declaration— Share Dividends(or Retained Earnings) XX Common Share Dividends Distributable. XX The amount of the entry is the full capitalized amount, number of new shares X market value on date of declaration Date of Distribution Common Shares Dividend Distributable XX Common Shares………………………XX Year End Closing Retained Earnings XX Share Dividends XX
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