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hhtfa8e_ch09_sm - Chapter 9 Stockholders Equity Short...

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Chapter 9 Stockholders’ Equity Short Exercises (5 min.) S 9-1 Corporation’s advantages: Continuous life Transferability of ownership (listed as two items on page 536) Limited liability of the stockholders Ease of raising capital (page 536) Corporation’s disadvantages: Corporate taxation Government regulation Separation of ownership and management (per text page 536) Financial Accounting 8/e Solutions Manual 204
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(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. Financial Accounting 8/e Solutions Manual 205
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(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 company’s stock price is unlimited. Chapter 9 Stockholders’ Equity 206
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(5-10 min.) S 9-4 DATE: _____________ TO: Karen Scanlon and Jennifer Shaw FROM: Student Name RE: Steps in forming a corporation The first step in organizing a corporation is to obtain a charter from the state. The charter authorizes the corporation to issue a certain number of shares of stock to the owners of the business, who are called stockholders . The corporation will exist when the incorporators (Per page 536) Pay fees, Sign the charter, File documents with the state, and Agree to a set of bylaws to determine how the corporation is to be governed internally. Later steps include the stockholders will electing a board of directors who in turn appoint officers to manage the corporation on a day-to-day basis. These officers consist of the chairperson of the board (the chief executive officer) and the president (the chief operating officer) who lead the chief financial officer who manage the day to day operations of the controller (accounting officer) and treasurer (finance officer). Financial Accounting 8/e Solutions Manual 207
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(5-10 min.) S 9-5 The $72,927,000 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. (10 min.) S 9-6 Millions Horris Printer: Cash……………………………………………. 17,123 Common Stock……………………………. 23 Additional Paid-in Capital……………….. 17,100 Delectable Doughnuts: Cash……………………………………………. 292 Common Stock……………………………. 292 Chapter 9 Stockholders’ Equity 208
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(10 min.)
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