Chapter 10 stockholders\' equity PDF

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Summary

These notes are from lectures in financial accounting, chapter 10...

Description

Paid-in capital: amount stockholders have invested in the corporation Retained earnings: amount of earnings the corporation has retained RE Beginning + Net Income - Dividends = RE End Treasury stock: corporation’s own stock that it has reacquired

PUBLIC

PRIVATE

Allows public investment

No public investments

More stockholders

Fewer stockholders

Regulated by the SEC

Not regulated by the SEC

Advantages of having a company go public: 1. Limited liabilities 2. Ability to raise capital and transfer ownership Disadvantages of having a company go public: 1. Additional taxes 2. More paperwork and rules Par value: legal capital per share of stock that’s assigned when the corporation is first established ***When doing a journal entry for par value, debit cash (number of shares times share price) and credit common stock (number of shares times par value) and additional paid-in capital (the rest)*** Features of Preferred stock 1. Convertible: shares can be exchangeable for common stock 2. Redeemable: shares can be returned to the corporation at a fixed price 3. Cumulative: shares receive priority for future dividends if dividends are not paid in a given year Companies buy back their own stock for various reasons: 1. To boost underpriced stock 2. To distribute surplus cash without paying dividends 3. To boost earnings per share 4. To satisfy employee stock ownership plans

***when doing an entry for purchasing treasury stock, debit treasury stock (number of shares times cost per share) and credit cash*** ***Entry for issuance of treasury stock debit cash, credit treasury stock and credit/debit

additional paid in capital (number of shares times the difference in prices of shares) Dividends date Declaration date: date on which board of directors declares the cash dividend will be paid Record date: specific date on which the company will determine who will receive the dividend (registered owner of stock) Payment date: date of the actual cash distribution ***recording cash dividends (declaration date) debit dividends and credit dividends payable ***(payment day) debit dividends payable and credit cash...