Mgmt 200 Spring 2011 Chapter 10

Mgmt 200 Spring 2011 Chapter 10 - Stockholders' Equity...

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1 Stockholders’ Equity Chapter 10 Stockholders’ Equity • Corporate form of organization • Benefits of Corporations – Access to large amounts of capital – Limited liability Limited liability – Liquidity – Risk sharing • Sources of stockholders’ equity – Contributed capital – Retained earnings Stockholders’ Equity Accounts • Common stock, at par • Preferred stock • Additional Paid-in Capital (APIC) • Retained Earnings • Other stockholders’ equity • Treasury stock (A contra-equity account)
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2 Contributed Capital • Authorized shares • Issued shares • Treasury stock • Outstanding shares – Voting rights, dividend rights • Market Capitalization – Shares outstanding x share price • Earnings per share – Net income / Average common shares outstanding Issuing common shares • Par value (or Stated value) • Initial Public Offering (IPO) Cash 25,000,000 Common stock 100,000 Capital in excess of par 24,900,000 Issue of 1,000,000 shares, $0.10 par value, at $25 per share. Treasury Stock Transactions • Repurchase of shares: Treasury shares, at cost 800,000 Cash 800,000 Repurchase of 20,000 shares at $40 per share. • Reissue of treasury shares: Cash 50,000 Capital in excess of par 10,000 Treasury shares, at cost 40,000 Reissue of 1,000 shares at $50 per share.
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3 Cash Dividends • Declaration date Dividends (RE) 15,000 Dividends payable 15,000 Declare dividend of $0.30 on 50,000 shares • Record date (Ex-date) • Payment date Dividends payable 15,000 Cash 15,000 Exercise 10-9 Power Drive Corporation designs and produces a line of golf equipment and golf apparel. Power Drive has 100,000 shares of common stock outstanding as of the beginning of 2012. Power Drive has the following transactions affecting stockholders’ equity in 2012. March 1 Issues 55,000 additional shares of $1 par value common stock for $52 per share. May
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Mgmt 200 Spring 2011 Chapter 10 - Stockholders' Equity...

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