Ch15 - CHAPTER 15 - STOCKHOLDERS' EQUITY: (pages 740-792)...

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CHAPTER 15 - STOCKHOLDERS' EQUITY: (pages 740-792) LEARNING OBJECTIVES 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. *10. Explain the different types of preferred stock dividends and their effect on book value per share. *This material is covered in an Appendix to the chapter. I. The corporate form. A. Primary forms of business organization: 1. Proprietorship 2. Partnership 3. Corporation. B. State corporate law 1. each state has its own business corporation act 2. acts are complex 3. Vary in their provisions and definitions. 4. To incorporate must submit articles of incorporation in state in which you wish to operate. II. Capital stock system A. each share represents an ownership right to: 1. Share proportionately in profits or losses. 2. Share proportionately in management (vote). 3. Share proportionately in corporate assets upon liquidation. 4. Share proportionately in any new issues of stock in the same class (preemptive right). 5. Share system provides easy transferability of ownership interests. B. Ownership interests . 1. Common stock : a. The residual corporate interest b. bears the risks c. Receives the benefits. 1
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d. share in profits/losses e. share in management (right to vote) f. share in any new issuance of stock (preemptive right) g. share of assets upon liquidation (maybe) 2. Preferred Stock a. may sacrifice: (1) a voice in management (2) limit share in profits in exchange for dividend preference b. Usually stated as: (1) a fixed dollar amount ($10 per share preferred stock) or (2) a percentage of par value (8%, $100 par value preferred stock). c. Some other features often associated with preferred stock include: (1) Cumulative (a) dividends not paid in any year must be made up in a subsequent year before common shareholders receive any dividend (b) called dividends in arrears (c) Dividends in arrears are not a liability until a dividend is declared by the Board of Directors. (d) Dividends in arrears are disclosed in the footnotes. (2) Participating – may share ratably with common shareholders in any profit distribution beyond prescribed rate (after common shareholders receive a similar %) (3) Nonvoting. (4) Convertible
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This note was uploaded on 10/03/2011 for the course ACG 3141 taught by Professor Graybeal during the Fall '08 term at University of Central Florida.

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Ch15 - CHAPTER 15 - STOCKHOLDERS' EQUITY: (pages 740-792)...

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