Chapter 18(5).ppt - Shareholders Equity Chapter 18 18-2 The...

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Chapter 18 Shareholders’ Equity
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18-2 The Nature of Shareholders’ Equity Assets – Liabilities = Shareholders’ Equity Shareholders’ Equity Paid-in Capital Retained Earnings Amounts earned by corporation Amounts invested by shareholders Accumulated Other Comprehensive Income Other gains and losses not included Sources of Shareholders’ Equity Net Assets
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18-3 Financial Reporting Overview
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18-4 Issued shares are authorize d shares of stock that have been sold. Unissued shares are authorize d shares of stock that never have been sold. Authorized shares are the maximum number of shares of capital stock that can be sold to the public. Authorized, Issued, and Outstanding Shares
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18-5 Authorized Shares Unissued Shares Treasury Shares Outstanding Shares Retired Shares Authorized, Issued, and Outstanding Shares
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18-6 Capital Stock Par value stock Dollar amount per share is stated in the corporate charter. Par value has no relationship to market value. No-par stock Dollar amount per share is not designated in corporate charter. Corporations can assign a stated value per share (treated as if par value). Legal capital is . . . The portion of shareholders’ equity that must be contributed to the firm when stock is issued. The amount of capital, required by state law, that must remain invested in the business. Refers to par value, stated value, or full amount paid for no-par stock.
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18-7 Capital Stock Common stock is the basic voting stock of the corporation. It ranks after preferred stock for dividend and liquidation distribution. Dividends are determined by the board of directors. Dividend and liquidation Dividend and liquidation preference over preference over common stock. common stock. Generally does not Generally does not have voting rights. have voting rights. Usually has a Usually has a par or stated value. par or stated value. May be convertible, May be convertible, callable, and/or callable, and/or redeemable. redeemable. Preferred Stock
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18-8 Preferred Stock Dividends Are usually stated as a percentage of the par or stated value. May be cumulative or noncumulative . May be partially participating , fully participating , or nonparticipating . Unpaid dividends must be paid in full before any distributions to common stock. Dividends in arrears are not liabilities, but the per share and aggregate amounts must be disclosed.
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18-9 Shares Issued for Cash 10,000 shares of stock are issued for $100,000 cash. $1 Par Value No Par Value No Par, $1 Stated Value Cash ....................................................... 100,000 Common stock, par value .............. 10,000 Paid-in capital – excess of par …… 90,000 To record issue of common stock. Cash ....................................................... 100,000 Common stock ............................. 100,000 To record issue of common stock. Cash ................................................................... 100,000 Common stock, stated value ..................... 10,000 Paid-in capital – excess of stated value …. 90,000 To record issue of common stock.
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18- 10 Shares Issued for Noncash Consideration Apply the general valuation principle by using fair value of stock given up or fair value of asset received, whichever is more clearly evident.
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