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

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Unformatted text preview: 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 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 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 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...
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121_09 - CHAPTER 9 STOCKHOLDERS EQUITY STOCKHOLDERS EQUITY...

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