Chapter 15 Lecture Notes

Chapter 15 Lecture Notes - StockholdersEquity The Corporate...

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1 Issuance of  stock Reacquisition  of shares The  Corporate  Form Corporate  Capital Preferred  Stock Dividend  Policy Presentation  and Analysis State  corporate  law Capital stock  or share  system Variety of  ownership  interests Features Accounting  for and  reporting  preferred  stock Financial  condition  and dividend  distributions Types of  dividends Stock split Disclosure  of  restrictions Presentation Analysis Stockholders’ Equity
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2 1. Discuss the characteristics of the corporate form of organization. 2. Identify the key components of stockholders’ equity. 3. Explain the accounting procedures for issuing shares of stock. 4. Describe the accounting for treasury stock. 5. Explain the accounting for and reporting of preferred stock. 6. Describe the policies used in distributing dividends. 7. Identify the various forms of dividend distributions. 8. Explain the accounting for small and large stock dividends, and for stock splits. 9. Indicate how to present and analyze stockholders’ equity. Learning Objectives
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3 The stockholders have the right to: share proportionately in profits and losses share proportionately in management share proportionately in corporate assets  upon liquidation share proportionately in any new issues of  stock of the same class (preemptive right)   The Rights of Stockholders The Rights of Stockholders
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4 A number of characteristics distinguish a corporation from proprietorships and partnerships. The most important of these characteristics are: 1 Separate legal existence – As an entity separate and distinct from its owners, the corporation acts under its own name rather than in the name of its stockholders. 2 Limited liability of stockholders – Since a corporation is a separate legal entity, creditors ordinarily have recourse only to corporate assets to satisfy their claims. 3 Transferable ownership rights – Ownership of a corporation is shown in shares of capital stock, which are transferable units. CHARACTERISTICS OF A CORPORATION
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4 Ability to acquire capital – It is relatively easy for a corporation to obtain capital through the issuance of stock. 5 Continuous life – The life of a corporation is stated in its charter; it may be perpetual or it may be limited to a specific number of years. 6 Corporate management – Although stockholders legally own the corporation, they manage the corporation indirectly through a board of directors they elect. 7 Government regulations – A corporation is subject to numerous state and federal regulations. 8 Additional taxes ( double taxation ) – Corporations, unlike proprietorships and partnerships, must pay federal and state income taxes as a separate legal entity. CHARACTERISTICS OF A
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Chapter 15 Lecture Notes - StockholdersEquity The Corporate...

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