Notes for class 23 chapter 11

Notes for class 23 chapter 11 - Accounting 2610 Chapter 11...

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Accounting 2610 – Chapter 11 - Class 23 1 1 Class 23 Chapter 11 shareholders equity Accounting 2610 Tzachi Zach 4/8/2008 2 Announcements ± Case 3 due in two weeks ± Will be posted later today ± Midterm 2 ± We will talk about it on next time 3 Plan ± Types of stocks in corporations ± Common ± Preferred ± Accounting for Stock issuances ± Stock absorptions ± Treasury stocks ± Accounting for dividends ± Cash dividends ± Stock dividends ± Stock splits ± Accounting for stock options
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Accounting 2610 – Chapter 11 - Class 23 2 4 Business Background ± Advantage of a corporation ± Becoming an owner is easy ± Ownership transfer is easy ± Limited liability ± A corporation is a separate legal entity. As such: ± It can own assets ± Incur liabilities ± Enter into contracts ± Sue and be sued 5 Ownership of a Corporation Stockholders Rights •Voting (in person or by proxy). •Proportionate distributions of profits. •Proportionate distributions of assets in a liquidation. 6 Ownership of a Corporation Vice President (Production) Vice President (Marketing) Vice President (Finance) Vice President (Controller) President Board of Directors Internal (managers) and External (non-managers) Stockholders (Owners of voting shares) Elected by shareholders Appointed by directors
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Accounting 2610 – Chapter 11 - Class 23 3 7 Authorized, Issued, and Outstanding Capital Stock The maximum number of shares of capital stock that can be sold to the public. Determined in the company’s charter of incorporations. Authorized Shares 8 Authorized, Issued, and Outstanding Capital Stock Authorized Shares Issued shares are authorized shares of stock that have been sold. Unissued shares are authorized shares of stock that never have been sold. 9 Authorized, Issued, and Outstanding Capital Stock Authorized Shares Unissued Shares Treasury Shares Outstanding Shares Issued Shares Treasury shares are issued shares that have been reacquired by the corporation. Outstanding shares are issued shares that are owned by stockholders.
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Accounting 2610 – Chapter 11 - Class 23 4 10 Types of Capital Stock 1. Common Stock ± Basic voting stock ± Ranks after preferred stock ± Dividend set by board of directors 2. Preferred Stock ± Usually no voting rights ± Preference over common stock ± Usually has a fixed dividend rate ± Mix of bond and stock 11 Special Features of Preferred Stock Convertible preferred stock may be exchanged for common stock. Callable preferred stock may be repurchased by the corporation at a predetermined price. 12 Par Value and No-par Value Stock ± Par value ± A nominal value per share of stock. ± Specified in charter ± Represents the legal capital ± Not important for analytical purposes. ± Important for legal purposes ± Legal capital is the amount of capital, required by the state, that must remain invested in the business.
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Notes for class 23 chapter 11 - Accounting 2610 Chapter 11...

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