2811422516

2811422516 - Chapter 9 Stockholders' Equity Check Points (5...

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Chapter 9 Stockholders’ Equity Check Points (5 min.) CP 9-1 1. The stockholders hold ultimate power in a corporation. 2. The chairperson of the board of directors is usually the most powerful person in a corporation. 3. The president is in charge of day-to-day operations. 4. The treasurer has primary responsibility for cash. 5. The controller manages the accounting. Chapter 9 Stockholders’ Equity 103
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(5-10 min.) CP 9-2 1. The right to vote on management matters clearly separates a stockholder from a creditor. 2. The common stockholders are the real owners of a corporation 3. Preferred stockholders have priority over common stockholders in (1) receipt of dividends and (2) receipt of assets if the corporation liquidates. 4. Common stockholders benefit more from a successful corporation because the preferred stockholders’ dividends are limited to a specified amount. The common stockholders’ potential for gains through an increase in the company’s stock price is unlimited. (5-10 min.) CP 9-3 1. The $61,938,000 was paid-in capital. It was not a profit and therefore had no effect on net income. 2. The par value of stock has no effect on total paid-in capital. Total paid-in capital is the total amount that stockholders have invested in (paid into) a corporation, including the par value of stock issued plus any additional paid-in capital. Financial Accounting 6/e Solutions Manual 104
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(10 min.) CP 9-4 Thousands 1. Common stock, December 31, 2003………………$ 649 Common stock, December 31, 2002……………… 623 Increase during 2003……………………………. . $ 26 Additional paid-in capital, December 31, 2003….$3,937,160 Additional paid-in capital, December 31, 2002…. 3,108,131 Increase during 2003……………………………. . 829,029 Total increase in paid-in capital during 2003…… $829,055 eBay must have issued common stock during 2003, as shown by the increase in the Common Stock account. Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Thousands 2. Cash…………………………………………………… 829,055 Common Stock…………………………………. .. 26 Additional Paid-in Capital ……………………. .. 829,029 Issued stock. 3. eBay had a profit during 2003, as indicated by the increase in Retained Earnings. Chapter 9 Stockholders’ Equity 105
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(10 min.) CP 9-5 Case A — Issue stock and buy the assets in separate transactions: Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Cash……………………………………… 500,000 Common Stock (10,000 × $5) ……. .. 50,000 Paid-in Capital in Excess of Par…. 450,000 Issued stock. Building…………………………………. . 400,000 Equipment………………………………. 100,000 Cash…………………………………… 500,000 Purchased plant assets. Case B — Issue stock to acquire the assets:
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2811422516 - Chapter 9 Stockholders' Equity Check Points (5...

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