ACCTFINAL - Par Value Par Value represented the Maximum...

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Unformatted text preview: Par Value Par Value represented the Maximum liability of the investors. Legal Capital Par value multiplied by the number of shares of stock issued represents the minimum amount of assets that must be retained in the company as protection for creditors. This amount is known as legal capital. Stated Value an arbitrary amount assigned by the board of directors to the stock. It has little relevance to investors and creditors. used on No-par stock. Market Value The price an investor must pay to purchase a share of stock. Book Value per share is calculated by dividing total stockholders' equity ( assets liabilities ) by the number of shares of stock owned by investors. Book balue per share differs from market value per share because equity is measured in historical dollars and market value reflects investors' estimates of a company's current value. Authorized Stock The maximum number of shares of stock corporations are legally permitted to issue. Issued Stock authorized stock that has been sold to the public. Treasury Stock When a corporation buys back some of its issued stock from the public. Treasury stock is still considered issued stock but it is no longer outstanding. Outstanding Stock (Total issued stock Treasury stock) Stock owned by investors outside the corporation. Common Stock All corporations issue common stock. Common stockholders bear the highest risk of losing their investment if a company is forced to liquidate. But they also reap the greatest rewards when a corporation prospers. Preferred Stock In exchange for special privileges in some areas, preferred stockholders give up rights in other areas. Preferred stockholders must be paid the liquidation value before any assets are distributed to common stockholders in the case of bankruptcy. - cumulative dividends If the corporation is unable to pay the preferred dividend in any year, the dividend is not lost but begins to accumulate. - Dividends in arrears cumulative dividends that have not been paid. Paid-in Capital in Excess of Par (or Stated) Value Any amount received above the par or stated value is recorded in ^. Declaration Date "Although corporations are not required to declare dividends, they are legally obligated to pay dividends once they have been declared" The date they recognize the dividends they will be paying as a liability. Date of Record "Cash dividends are paid to investors who owned the preferred stock on the "Date of Record" It is just a cut off date. FINANCIAL STATEMENT UNAFFECTED - ex-dividend Any stock sold after the date of record but before the payment date. (The buyer will not receive the upcoming dividend). Payment Date The date the cash dividend is actually paid. Assets(cash) and liabilities (dividends payable) both decrease. Income statement not affected. Stock Dividends when companies choose to distribute additional shares of stock to stockholders instead of cash when they are paying dividends. Stock Split replaces existing shares with a greater number of new shares. Any par or stated value of the stock is proportionally reduced to reflected the new number of shares outstanding. ...
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