121_09 - CHAPTER 9 STOCKHOLDERS EQUITY STOCKHOLDERS EQUITY...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 9 STOCKHOLDERS’ EQUITY STOCKHOLDERS’ EQUITY Paid-in capital (contributed capital) Retained earnings SHARES OF STOCK Authorized Maximum shares that can be issued Issued Sold to public Treasury Issued and repurchased Outstanding Outstanding = Issued - Treasury Arbitrary amount assigned to stock Legal capital Must remain invested in corporation Cannot be paid as dividends PAR VALUE PAID-IN CAPITAL Cash received when stock first sold Amount invested by stockholders Also called contributed capital Common stock (par value) Total paid-in capital + Paid-in capital in excess of par SELLING STOCK Directly to stock buyers To underwriters Resold to customers, public
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
ISSUE STOCK AT PAR Issue price $10 Par value $10 Shares issues 3,200,000 shares 32,000,000 Common stock 32,000,000 Cash (3,200,000 x $10) Credit Debit Description Date Issue price > par value Paid-in capital accounts Par value Paid-in capital in excess par [PIC x/Par] No profit incurs when stock Originally sold to public Repurchased, resold to public ISSUING STOCK ISSUED ABOVE PAR Par value = $0.01 Issue price = $10.00 Issued 3,200,000 shares 31,968,000 Paid-in capital in excess of par value (3,200,000 x $9.99) 32,000 Common stock (3,200,000 x $0.01) 32,000,000 Cash (3,200,000 x $10) Credit Debit Description STOCKHOLDERS’ EQUITY Common stock, $0.01 par, 40 million shares authorized, 3.2 million shares issued $ 32,000 Paid-in capital in excess of par 31,968,000 Total paid-in capital 32,000,000 Retained earnings 26,000,000 Total stockholders’ equity $58,000,000 Stockholders’ Equity CALCULATE ISSUE PRICE Avg. issue price = Total paid-in capital Shares issued PRACTICE QUESTIONS Questions 1, 2
Image of page 2
Does not have a par value May have stated value (similar to par) NO-PAR STOCK ISSUING NO-PAR STOCK No par value Issue price = $20.00 Issued 3,000 shares There is no Paid-in Capital in Excess of Par for true no-par stock 60,000 Common stock 60,000 Cash (3,000 x $20) Credit Debit Description Date STOCKHOLDERS’ EQUITY Common stock, no-par, 10,000 shares authorized, 3,000 shares issued $ 60,000 Retained earnings 46,000 Total stockholders’ equity $106,000 Stockholders’ Equity No-par stock with stated value identical to par value stock Premium entitled Paid-in Capital in Excess of Stated Value--Common STATED VALUE CLASSES OF STOCK Common Stock Issued by every corporation Preferred Stock Preferred = Paid before common stock Cash dividends In liquidation Stated as percentage of par value Par value, $100 Stated rate, 6% Dividend amount, $6.00 Stated as dollar amount, $3.00 PREFERRED DIVIDENDS
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Safer because dividends paid first Dividend usually paid each period Less risk of fall in stock price Maximum dividend stated Less opportunity for rise in price PREFERRED STOCK Order of equity section Preferred stock, par value Preferred stock, paid-in cap x/par Common stock, par value Common stock, paid-in cap x/par
Image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern