stockholders' equity -no 1.ppt

8/9/2019 Stockholders' Equity -No 1.ppt

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STOCKHOLDERS’ EQUITY:

CLASSES OF CAPITAL STOCK

CHAPTER 12

http://vrpacioli.loyola.edu/ac101/chapter12/1.ram


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,isad(antages o the,isad(antages o the

Corporate )or! o #usiness*Corporate )or! o #usiness*

o(ern!entalregulation

o(ern!ental

regulation,oubletaxation

,ouble

taxation

+i!ited ability to

raise creditor capital

+i!ited ability to

raise creditor capital

Entrenched$

ineicient!anage!ent

Entrenched$

ineicient!anage!ent

* Relati(e to a Partnership* Relati(e to a Partnership&'&


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/ncorporators

Persons who or! corporation

Articles o incorporation

Application or corporate charter

Corporate Charter

Contract between state and incorporatorsgranting legal existence to corporation

CorporationsCorporationseneral Ter!inologyeneral Ter!inology


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CorporationsCorporationseneral Ter!inologyeneral Ter!inology

Corporate bylaws

Rules adopted by board o directors to

go(ern conduct o corporate aairs rganization costs

/ntangible assets subect to a!ortization

e"g"$ +egal and accounting costs

,o!estic (s" )oreign Corporation

,epends on state in which chartered


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,irecting the Corporation,irecting the Corporation

Elected bywho!8

Elected bywho!8

)or!ulatescorporate policies

)or!ulatescorporate policies

Hires corporateoicers

Hires corporateoicers

Board

of

Directors Co!position o

board8

Co!position o

board8


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,irecting the Corporation,irecting the Corporation

/ncludes president$(ice presidents$secretary$ and

treasurer

/ncludes president$(ice presidents$secretary$ and

treasurer

Responsible or routine corporate

operations

Responsible or routine corporate

operations

Carry out thepolicies set by theboard o directors

Carry out thepolicies set by theboard o directors

Corporate Officers


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Capital %toc4Capital %toc4

A share o stoc4 is a transerable unit oownership"

%toc4 ownership records !ay be 4ept byexternal parties called stoc4-transer agents

and stoc4 registrars"

100 Shares

VidTel, Inc.

Common Stock

%toc4 Certiicate%toc4 Certiicate


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The two classes o capital stoc4 are co!!on andpreerred"

100 Shares

VidTel, Inc.

Common Stock

Capital %toc4 !ay ha(e Par (alue

>o par (alue >o ar (alue with a stated (alue



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100 Shares

No-par value

VidTel, Inc.

Common Stock

>o-par stoc4 has no par or stated (alue"


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100 Shares

No-par,$5 stated value

VidTel, Inc.

Common Stock

>o-par$ stated (alue stoc4>o-par$ stated (alue stoc4

%toc4 without par (alue$ but to whicha stated (alue has been assigned

by the board o directors"

%toc4 without par (alue$ but to whicha stated (alue has been assigned

by the board o directors"


12 10


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ar4et ;alue

Price at which a seller is willing to sell or

and a buyer is willing to buy or in the!ar4etplace"


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12 17


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Three /!portant>u!bers

>o" o shares authorized

>o" o shares issued

>o" o shares outstanding

12 19


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Capital %toc4Capital %toc4Authorized

%hares

The !axi!u! nu!bero shares the

corporation !ay issueas designated in its

charter is the

authorized nu!ber oshares"

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/ssued

shares areauthorizedshares ostoc4 thatha(e been

sold"

Bnissued

shares areauthorizedshares ostoc4 thatha(e ne(erbeen sold"

Authorized%hares

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Bnissued%hares

Treasury%hares

utstanding%hares/ssued

%hares

utstanding sharesare shares that weresold and issued and

are still held bystoc4holders"

Authorized%hares

Treasury shares areissued shares that ha(ebeen reac5uired by the

corporation"

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uestionuestion

Ace Co!pany6s corporate charter authorizes1$:::$::: shares o co!!on stoc4" Ace issued

0::$::: shares and later reac5uired 1::$:::shares" How !any shares are outstanding and

how !any are unissued respecti(ely8

a" 0::$::: D '::$:::

b" .::$::: D .::$:::c" .::$::: D &::$:::

d" &::$::: D .::$:::




a" 0::$::: D '::$:::

b" .::$::: D .::$:::c" .::$::: D &::$:::

d" &::$::: D .::$:::

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a" 0::$::: D '::$:::

b" .::$::: D .::$:::c" .::$::: D &::$:::

d" &::$::: D .::$:::




a" 0::$::: D '::$:::

b" .::$::: D .::$:::c" .::$::: D &::$:::

d" &::$::: D .::$:::

uestionuestion

/ssued 0::$:::

Reac5uired 1::$:::

utstanding .::$:::

Authorized 1$:::$:::

/ssued 0::$:::

Bnissued &::$:::

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Classes o Capital %toc4Classes o Capital %toc4

Co!!on %toc4

Residual E5uity - all other clai!s againstcorporation6s assets$ including those o creditors$

ran4 abo(e the clai!s o co!!on stoc4holders"1" /s not auto!atically entitled to di(idends

2" ,oes not ha(e asset preerencein li5uidation

C l a i m s

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Preerred %toc4

Preerences include

1" ,i(idends2" Priority in case o li5uidation

A di(idend rate is usuallyexpressed either as a percento par (alue or as a dollara!ount per share

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Co!panies issue preerredstoc4 to a(oid

Bsing bonds with ixed interestcharges

/ssuing so !any additionalshares o co!!on stoc4

,iluting the co!!onstoc4holders6 control o thecorporation


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Types o Preerred %toc4Types o Preerred %toc4

Preerence as to di(idendsG

>oncu!ulati(eBnpaid currentdi(idends neednot be paid in

uture years"

Cu!ulati(eBnpaid di(idends

!ust be paidbeore any

distribution toco!!onstoc4holders"


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Paid-in Capital

Preerred %toc4 - 1:: par$ 3I$

Cu!ulati(eJ 1:$::: shares authorized$

issued$ and outstanding 1$:::$:::Co!!on %toc4 - 1: par$ '::$:::

shares authorized$ &:$::: issued and

outstanding &::$:::

Total Paid-in Capital 1$&::$:::

Retained Earnings '::$:::

Total %toc4holdersK E5uity 1$3::$:::

Stockholders’ Equity:


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%toc4 /ssued or Cash%toc4 /ssued or Cash

Let’s take a closer look at the jor!al

e!tr"es #he! stock "s sol$ %or cash&

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% C


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%toc4 /ssued or Cash%toc4 /ssued or Cashuidelines or Lournal Entryuidelines or Lournal Entry

,ebit cash or nu!ber o shares ti!esprice per share"

Credit co!!on o-Par %toc4

a!ount o cash recei(ed

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% 4 / d C h


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%toc4 /ssued or Cash%toc4 /ssued or Cashuidelines or Lournal Entryuidelines or Lournal Entry

/ cash recei(ed diers ro! par orstated (alue Credit Paid-in Capital in Excess oPaid-in Capital in Excess o Par Par

;alue;alue or dierence between cash recei(edand total par (alue"

Credit Paid-in Capital in Excess oPaid-in Capital in Excess o %tated%tated ;alue;alue or dierence between cash recei(ed

and total stated (alue"

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%t 4 / d C h


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%toc4 /ssued or Cash%toc4 /ssued or CashPar ;alue Exa!plePar ;alue Exa!ple

n %epte!ber 1st$ 1:$::: shares o 2: par (alueco!!on stoc4 were sold or cash o 2. per share"

E>ERA+ LBR>A+ Page: 1

Date Description PR Debit Credit

12-'0

% C%t 4 / d C h


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9N1 Cash 2.:$:::

Co!!on %toc4 2::$:::

Paid-in Capital in Excess o Par ;alue .:$:::

To record issuance o stoc4 or cash

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% 4 / d C h%t 4 / d C h


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9N1 Cash 2.:$:::

Co!!on %toc4 2::$:::

Paid-in Capital in Excess o Par ;alue .:$:::




%hares

,ollars per

share Total

Cash 1:$::: M 2. O 2.:$:::

Co!!on stoc4 1:$::: M 2:


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%toc4 /ssued or Cash%toc4 /ssued or Cash%tated ;alue Exa!ple%tated ;alue Exa!ple

n %epte!ber 1st$ 1:$::: shares o no-par$ 2:stated (aluestated (alue co!!on stoc4 were sold or cash o

2. per share"



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%t 4 / d C h%t 4 / d C h


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2. per share"



9N1 Cash 2.:$:::

Co!!on %toc4 2::$::: Paid-in Capital in

Excess o %tated ;alue .:$:::


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%t 4 / d C h%t 4 / d C h


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9N1 Cash 2.:$:::

Co!!on %toc4 2::$::: Paid-in Capital in

Excess o %tated ;alue .:$:::



2. per share"


%tated (alue is treated ust li4epar (alue or accounting purposes"


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%t 4 / d C h%t 4 / d C h


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Date Description PR Debit Credit9N1 Cash 2.:$:::

Co!!on %toc4 2.:$:::


%toc4 /ssued or Cash%toc4 /ssued or Cash>o-Par Exa!ple>o-Par Exa!ple

)or true no-par stoc4$ credit the

Co!!on %toc4 account or thetotal cash recei(ed"

n %epte!ber 1st$ 1:$::: shares o no-par (alueno-par (alueco!!on stoc4 were sold or cash o 2. per share"

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%t 4 / d %toc4 /ss ed or


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%toc4 /ssued or%toc4 /ssued or

Property or %er(icesProperty or %er(ices

Record transaction at air (alue oproperty or ser(ices recei(ed or air(alue o stoc4 issued$ whiche(er is

!ore clearly e(ident"

)air (alueo property

)air (alue

o stoc4

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%t 4 / d %toc4 /ssued or


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n ay 1st$ 1:$::: shares o 2: par (alue stoc4were exchanged or land (alued at '.:$:::"



@e do not 4now the air (alue o thestoc4 issued because it is notacti(ely traded in the !ar4et"

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%t 4 / d %toc4 /ssued or


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.N1 +and '.:$:::

Co!!on %toc4 2::$:::

Paid-in Capital in Excess o Par 1.:$:::

n ay 1st$ 1:$::: shares o 2: par (alue stoc4were exchanged or land (alued at '.:$:::"

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#alance %heet Presentation#alance %heet PresentationPaid-in Capital in Excess o Par ;aluePaid-in Capital in Excess o Par ;alue

The ollowing slide illustrates atypical #alance %heet

presentation o %toc4holders6E5uity" All nu!bers are

assu!ed and are not ta4enro! pre(ious or text

exa!ples"

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Paid-in Capital

Preerred %toc4 - 1:: par$ 3I$

Cu!ulati(eJ 1:$::: shares authorized$

issued$ and outstanding 1$:::$:::

Co!!on %toc4 - 1: par$ '::$::: shares authorized$ &:$::: issued and

outstanding &::$:::

Paid-in Capital in excess o Par ;alue

Preerred %toc4 1::$:::

Co!!on %toc4 7:$::: 17:$::: Total Paid-in Capital 1$.7:$:::

Retained Earnings '::$:::

Total %toc4holdersK E5uity 1$77:$:::

#alance %heet Presentation#alance %heet PresentationPaid-in Capital in Excess o Par ;aluePaid-in Capital in Excess o Par ;alue

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>ot per share boo4 (alue

The theoretical li5uidation (alue RiceQ

i"e"$

Total stoc4holders6 e5uity

i"e"$

>et assets


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#oo4 ;alue Per %hare#oo4 ;alue Per %hare / no Preerred %toc4 is outstanding

#oo4 ;alue per share o co!!on stoc4e5uals total %toc4holders6 E5uity di(ided

by nu!ber o shares o co!!on stoc4outstanding"

/ Preerred %toc4 is outstanding

To get #; per share or co!!on$ subtractG


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End o Chapter 12End o Chapter 12

stockholders' equity -no 1.ppt

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