Chapter+11+Slides+with+notes

Chapter+11+Slides+with+notes - Chapter 11 Reporting and...

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Chapter 11 Reporting and Interpreting Owners’ Equity Slide 1 Chapter Eleven ACCT 2010 Fall 2011 Allen Huang Liquidation Rights Liquidation Rights 1. Wages 2. Taxes 3. Secured Creditors including Secured Bonds (backed by the issuer and by specific assets that the corporation owns) 4. General Creditors Including Debentures (back only by the corporation’s good faith and credit) 5. Subordinated Creditors Including Subordinated Slide 2 Chapter Eleven Debentures (unsecured bond that have a junior claim on their assets compared to other unsecured bonds) 6. Preferred Stockholders 7. Common Stockholders
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Understanding The Business Advantages of a corporation over partnership Simple to become an owner Easy to transfer ownership Provides limited liability Because a corporation is a separate legal entity, it can . . . Slide 3 Chapter Eleven Own assets. Sue and be sued. Incur liabilities. Enter into contracts. Ownership of a Corporation n Voting. o Proportionate distributions of profits. Stockholders’ Slide 4 Chapter Eleven p Proportionate distributions of assets in a liquidation. Rights
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Authorized shares are the maximum number of shares of capital stock that can be sold to the public Authorized, Issued, and Outstanding Shares Issued shares are authorized Unissued shares are authorized can be sold to the public. Slide 5 Chapter Eleven shares of stock that have been sold. shares of stock that never have been sold. Outstanding shares are issued shares that are Authorized, Issued, and Outstanding Shares Unissued Shares Outstanding Shares Issued Shares issued shares that are owned by stockholders. Slide 6 Chapter Eleven Treasury Shares Treasury shares are issued shares that have been reacquired by the corporation.
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Sale and Issuance of Stock Initial public offering (IPO) Seasoned new issue The first time a corporation sells stock to the public. Subsequent sales of new stock to the public. Slide 7 Chapter Eleven Wesfarmers issues new stock. Wesfarmers IPO Video Slide 8 Chapter Eleven
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Slide 9 Chapter Eleven Common Stock Basic voting stock Slide 10 Chapter Eleven Dividend set by board of directors Ranks after preferred stock
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Par Value Par Value Nominal value Legal capital Slide 11 Chapter Eleven Legal capital is the amount of capital, required by the state, that must remain invested in the business. Accounting for Stockholder’s Equity Two primary sources of stockholders’ equity Retained earnings Contributed capital Slide 12 Chapter Eleven Common stock, par value Capital in excess of par value
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Sale and Issuance of Stock On July 6, Wesfarmers issued 100,000 shares of $0.01 par value common stock for $20 per share. Prepare the journal entry to record this transaction. 100,000 shares × $20 per share = $2,000,000 100,000 shares × $0.01 par value = $1,000 Slide 13 Chapter Eleven Date Description Debit Credit July 6 Cash (+A) 2,000,000 Common stock (+SE) 1,000 Capital In excess of par value (+SE) 1,999,000 GENERAL JOURNAL Secondary Markets Transactions between two investors that do not affect the corporation’s accounting records.
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Chapter+11+Slides+with+notes - Chapter 11 Reporting and...

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