4 Authorization and Issuance of Capital Stock a Authorized Stock stock which

4 authorization and issuance of capital stock a

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the owners’ contributed capital and its retained earnings. 4.Authorization and Issuance of Capital Stock: a.Authorized Stock: stock which the corporation is permitted to issue b.Issued Stock: stock that, at one time or another, has been in the hands of c.Outstanding Stock: stock that is currently in the hands of the stockholders.d.Legal Capital: the amount of capital, defined by state law, the provides through its charter the stockholders through sale or other means Stock that is in circulation and is being traded among stockholders. protection for the creditors and cannot be returned to stockholders (through dividends, for example, or through the repurchase of the corporation’s outstanding stock – treasury stock) as long as creditor claims remain outstanding. It is reflected as the balance in the Capital Stock (Common/Preferred Stock) accounts. Legal Capital is usually designated as: 1. Par Value 2. Stated Value 3. No-Par Value – No Stated Value e. Procedures for Recording Stock: i. Par Value: an arbitrary value set as the face amount of the stock and representing legal capital Example: Issue 10,000 shares of capital stock with a par value of $5/share for $8/share
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Cash 80,000 Capital Stock (Common or Preferred) 50,000 (legal capital) Paid-in Capital in Excess of Stated Value 30,000 ii. Stated Value: an arbitrary value set as the face amount of the stock and representing legal capital. Example: Issue 10,000 shares of capital stock with a stated value of $5/share for $8/share Cash 80,000 Capital Stock (Common or Preferred) 50,000 Paid-in Capital in Excess of Stated Value 30,000 iii. No-Pare Value – No Stated Value: Example: Issue 10,000 shared of capital stock for $8/share Cash 80,000 Capital Stock (Common or Preferred) 80,000
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  • Fall '14
  • CarolRowey
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