Session 13 - Class13:ShareholdersEquity HyeSunChang ACCY303...

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Class 13: Shareholders’  Equity Equity Hye Sun Chang ACCY 303  
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Recap Recap Under proprietary view, the firm and its owners are one and the  same.  -Bondholders are outsiders-hence, interest cots are  expenses -Shareholders are not outsiders-thus, dividends are a distribution  of earnings to owners,  not an expense  of the company.  -Bondholders are outsiders-hence, early extinguishment of debt  generate accounting gains and losses . -Shareholders are not outsiders-thus, stock repurchases  do not  generate accounting gains and losses
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Recap Recap The stockholders’ equity section of Peter Corporation’s balance  sheet at Dec 31, 2008 follows: Common stock ($10 par value): authorized 1,000,000 shares, issued and outstanding 900,000 shares 9,000,000 Additional paid-in capital 2,700,000 Retained earnings 1,300,000 Total stockholders’ equity 13,000,000 On Jan 2, 2009, Peter purchased and retired 100,000 shares of its  stock for $1,800,000.   Required: prepare the journal entries to record the above  transaction.  
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Learning Objectives Learning Objectives 1. Explain corporate dividends, including the  similarities and differences between cash  and property dividends. 2. Explain stock dividends and stock splits and  how they are accounted for.
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Balance Sheet  Balance Sheet  Current Assets Cash and cash equivalents Short-term investments: Trading or AFS  securities  Accounts receivable Inventory Current Liabilities Accounts payable Notes payable Interest payable   Non-current liabilities Bonds payable Lease payable Deferred tax liability Long-term investments  Property, plant and equipment Intangible assets: goodwill, patents Other assets : bond issue cost, deferred tax  asset  Capital stock: preferred stock, common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Treasury stock 
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Types of Capital Stock Types of Capital Stock • Common stock – The basic voting stock of the corporation. – Ranks after preferred stock for dividend and  liquidation distribution. – Dividends determined by the board of directors. • Preferred stock – Generally does not have voting rights. – Usually has a par or stated value. – Dividend and liquidation  preference over  common stock. – May be convertible, callable, and/or  redeemable.
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Preferred Stock Dividends Preferred Stock Dividends • Are usually stated as a percentage of the par  or stated value. • May be  cumulative  or  noncumulative . • May be partially participating, fully  participating, or nonparticipating.
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