T13 - 1 Chapter 13: Accounting for corporations NOTE on...

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Unformatted text preview: 1 Chapter 13: Accounting for corporations NOTE on reading Exclude TB 514 – 516 (Stock dividend), 518 – 520 (convertible and callable preferred stock) (They will be discussed briefly in IA2 Equity accounting) 1. Limited Companies Advantages and disadvantages (TB506- 507, chapter 1) Organization and management (TB 507-508) Stockholders (TB 508 – 509) 2. Accounting entries for issuance of shares Dr. Cash Cr. Common Stock Cr. Paid in capital in excess of par, common stock HK Common stock = issued ordinary share capital HK Paid in capital in excess of par = share premium Issue at discount: general prohibited in HK, unless with special situation (Companies Ordinance, Cap. 32) The issuance of stock can be used for exchange of asset or payment of expense 3. Dividend and stock split Dr. Retained earnings Cr. Dividend payable (date of declaration) Dr. Dividend payable Cr. Cash Dividend is NOT AN EXPENSE. It is the appropriation of the profit to owners (~drawings) Stock split: no effect to accounting (but change the price per share), but a disclosure note is required 4. Preferred stock (or Preference share in HK) The journal entries for issuance is the same as the common stock. Preferred in delivery of dividend Cumulative v non cumulative preferred stock NOTE: cumulative unpaid dividend is NOT a liability to the company. 5. Treasury stock Purchase: Dr. Treasury stock (contra equity) Cr. Cash Re-issuance Dr. Cash Cr. Treasury stock Cr. Premium (or Dr. RE) 6. Financial Statements Statement of retained earnings (accumulated profit over the years) + statement of stockholder’s equity (sole trader = statement of owner’s equity) Additional Question Ex 13-8 2 Preferred Common 2009 ($8,000 paid) Preferred* ................................................................................ $ 8,000 Common remainder ............................................................... _______ $0 Total for the year ...................................................................... $ 8,000 $0 2010 ($24,000 paid) Preferred* ................................................................................ $ 10,400 Common remainder ............................................................... _______ $ 13,600 Total for the year ...................................................................... $ 10,400 $ 13,600 2011 ($120,000 paid) Preferred* ................................................................................Preferred* ....
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This note was uploaded on 11/22/2011 for the course BUSI 1002 taught by Professor Liu during the Fall '10 term at HKU.

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T13 - 1 Chapter 13: Accounting for corporations NOTE on...

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