Chapter 18-1 - ACG 3141: Chapter 18 Equity Part 1 (Class...

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1 ACG 3141: Chapter 18 Equity Part 1 (Class 22)
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2 Topics Describe the components of shareholders’ equity and explain how they are reported in a statement of shareholders’ equity . Describe comprehensive income and its components. Record the issuance of shares when sold for cash, for noncash consideration, and by share purchase contract. Describe what occurs when shares are retired and how retirement is recorded. Distinguish between accounting for retired shares and for treasury shares.
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3 Learning Objectives Describe the components of shareholders’ equity and explain how they are reported in a statement of shareholders’ equity.
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5 The Nature of Shareholders’ Equity Assets – Liabilities = Shareholders’ Equity Net Assets (Residual Interest)
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6 Sources of 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 in net income
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7
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8 Southwest Airlines Shareholders Equity @ 12/31/2004 Common stock (1.00 par value: 2 billion shares authorized; 790,181,982 and 789,390,678 shares issued in 2004. ............ 790 Capital in excess of par value. ................................................. 299 Retained earnings. ................................................................... 4,089 Accumulated other comprehensive income. ............................ 417 Treasury stock, at cost: 5,199,192 shares in 2004. ................. (71) Total Stockholders’ Equity. ...................................................... 5,524
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9 The Corporate Organization Advantages: Ease of raising capital. Ease of ownership transfer. Limited liability. Continuous existence. Disadvantages: Double taxation. Government regulation.
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10 Types of Corporations Not-for-profit corporations include hospitals, charities, and government agencies such as FDIC. Privately-held corporations whose shares are owned by only a few individuals. Publicly-held corporations whose shares are widely owned by the general public.
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11 Hybrid Organizations S Corporation Limited liability protection of a corporation. Maximum number of owners. Limited liability company Limited liability protection of a corporation. All owners may be involved in management without losing limited liability protection. No limit on number of owners . Limited liability partnership Owners are liable for their own actions but not entirely liable for actions of other partners. Double taxation avoided.
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Formation of a Corporation Number and classes of shares authorized. Composition of initial
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Chapter 18-1 - ACG 3141: Chapter 18 Equity Part 1 (Class...

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