fin-acctg7-sm-ch09 - Chapter 9 Stockholders Equity Short...

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Unformatted text preview: Chapter 9 Stockholders Equity Short Exercises (5 min.) S 9-1 Corporations advantages: Continuous life and transferability of ownership Limited liability of the stockholders Corporations disadvantages: Corporate taxation Government regulation (5 min.) S 9-2 1. The stockholders hold ultimate power in a corporation. 2. The chairperson of the board of directors is usually the most powerful person in a corporation. Title is CEO. 3. The president is in charge of day-to-day operations. Title is COO. 4. The chief financial officer is in charge of accounting and finance. Title is CFO. Chapter 9 Stockholders Equity 51 (5-10 min.) S 9-3 1. The common stockholders are the real owners of a corporation 2. Preferred stockholders have priority over common stockholders in (1) receipt of dividends and (2) receipt of assets if the corporation liquidates. 3. Common stockholders benefit more from a successful corporation because the preferred stockholders dividends are limited to a specified amount. The common stockholders take more risk so their potential for gains through an increase in the companys stock price is unlimited. (5-10 min.) S 9-4 The $61,938,000 was paid-in capital. It was not a profit and therefore had no effect on net income. The par value of stock has no effect on total paid-in capital. Total paid-in capital is the total amount that stockholders have invested in (paid into) a corporation, including the par value of stock issued plus any additional paid-in capital. Financial Accounting 7/e Solutions Manual 52 (10 min.) S 9-5 Millions Hewlett-Packard: Cash. 17,993 Common Stock. 27 Additional Paid-in Capital.. 17,966 Krispy Kreme Doughnuts: Cash. 298 Common Stock. 298 Chapter 9 Stockholders Equity 53 (10 min.) S 9-6 Case A Issue stock and buy the assets in separate transactions: Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Cash.. 200,000 Common Stock (10,000 $5)..... 50,000 Paid-in Capital in Excess of Par 150,000 Issued stock. Building 160,000 Equipment 40,000 Cash.. 200,000 Purchased plant assets. Case B Issue stock to acquire the assets: Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Building 160,000 Equipment... 40,000 Common Stock (10,000 $5). 50,000 Paid-in Capital in Excess of Par... 150,000 Issued stock to acquire building and equipment....
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fin-acctg7-sm-ch09 - Chapter 9 Stockholders Equity Short...

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