Chapter 11 : Owner's Equity: Stock Preferred vs. Common stock, Treasury stock (Calculations, definition) All corporations must issue common stock, but only some issue preferred stock. Preferred Stock : This stock has specific rights over common stock. This differs’ from common stock because of the # of rights granted to stock holders’ like: Preferred stock no granted voting rights, lower risks for preferred stock and preferred stock usually has a fixed dividend rate. (Preferred dividend preference * dividend rate, $40,000*6%= $2,400) Common Stock : is the basic voting stock issued by a corporation. It is credited by (# of shares sold * par value per share) Investors buy this kind of stock to get a return: stock price appreciation and dividends. Treasury Stock: is a corporations own stock that had issued but was subsequently required and is still being held by that corporation. These shares have no voting, dividend, or other stockholder rights as a treasury stock. With the cost method ( # of shares bought in the open market *par value) This is a
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