Chapter 08 - 2 slides each

Chapter 08 - 2 slides each - 9-11Chapter 8Accounting for...

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Unformatted text preview: 9-11Chapter 8Accounting for Shareholders’ Equity2Equity in CorporationsThe equity section for a corporation is divided into two parts:Contributed Capital (a.k.a. paid-in-capital)--this is the amount that owners have contributedCapital StockAdditional paid-in-capitalRetained Earnings--this is what the company has earned over its whole life, less any dividends paid out9-23Authorized, Issued, and Outstanding Capital StockThe maximum number of shares of capital stock that can be sold to the public is called the authorizednumber of shares. AuthorizedShares4Authorized, Issued, and Outstanding Capital StockAuthorized SharesIssued shareshave been sold.Unissued shareshave never been sold.9-35Authorized, Issued, and Outstanding Capital StockAuthorizedSharesUnissuedSharesTreasurySharesOutstandingSharesIssuedSharesOwned by stockholdersReacquired by corporation6Sale and Issuance of Capital StockAn initial public offering (IPO) is the very first time a corporation sells stock to the public.9-47Common StockBasic voting stock of the corporationRanks afterpreferred stock for dividend and liquidation distribution.Dividend rates are determined by the board of directors based on the corporation’s profitability.8Par Value StockPar value Is a nominal value per share of capital stock specified in the charter.Has norelationship to market value.Serves as the basis forlegal capital.Legal capital is the amount of capital, required by the state, that must remain invested in the business.It serves as a cushion for creditors.9-59Has dividend and liquidation preference over common stock.Generally does nothave voting rights.Usually has a par or stated value.Usually has a fixed dividend rate that is stated as a percentage of the par value.Preferred Stock10Accounting for Capital Stock TransactionsTwo primary sources of stockholders’ equity:Contributed capitalPar or stated value of issued stock.Additional paid-in capital in excess of par or stated value.Retained earningsThe cumulative net income earned by the corporation less the cumulative dividends declared by the corporation. 9-611Accounting for the Issue of Common StockWhen stock is issued, the equity account Common Stockis credited for the par or stated value of the stock....
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Chapter 08 - 2 slides each - 9-11Chapter 8Accounting for...

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