{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

4 - • Contra-equity account(debit balance • Reduces...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Authorized, Issued and Outstanding Authorized – maximum number of shares company can issue as indicated in its charter Issued – number of shares company has sold to shareholders Outstanding – number of shares currently in shareholders’ possession Any difference between issued and outstanding is due to treasury stock Treasury Stock Company’s own stock that it has issued and later reacquired Reasons: All authorized shares have been issued and shares are needed for employee stock purchase plans Company wants to purchase its shares at a low price and the re-issue them at a higher price Management want to avoid a takeover Accounting for Treasury Stock Recorded at cost (not par value)
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: • Contra-equity account (debit balance) • Reduces stockholders’ equity and assets • If sold above, paid-in capital from treasury stock transactions is credited • Suppose a company purchased 10,000 shares of its own $1 par common stock for $200,000 Later, the company resells the treasury shares for $250,000 Retained Earnings • Balance = Net incomes – net losses – dividends declared • Accumulated earnings the company keeps • Not a reservoir of cash • Normal credit balance • Debit balance = Deficit Losses and dividends exceed earnings Dividends • Distribution to stockholders • Three forms Cash Stock Noncash assets...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online