stockholders’ equity:paid-in capital
TRANSCRIPT
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Stockholders’ Equity:Stockholders’ Equity:Paid-In CapitalPaid-In Capitalotaleem.blogspot.comotaleem.blogspot.comfor more presentation(follow me)for more presentation(follow me)
Chapter 11
11-2
Existence is separate from
owners.
An entity created by law.
Has rights and privileges.
Privately, or Closely Held
Publicly Held
Ownership can be
CorporationsCorporations
11-3
Limited personal liability for
stockholders
Transferability of ownership
Professional management
Continuity of existence
Advantages of Advantages of IncorporationIncorporation
11-4
Heavy taxation
Greater regulation
Cost of formation
Separation of ownership and management
Disadvantages of Disadvantages of IncorporationIncorporation
11-5
The costs associated with incorporation are usually
expensed immediately, but amortized over 5 years for
tax purposes.
Formation of a CorporationFormation of a Corporation
• Each corporation is formed according to the laws of the state where it is located.
• The application for corporate status is called the Articles of Incorporation.
11-6
Stockholders
Rights
Voting (in person or by proxy).
Proportionate distribution of
dividends.Proportionate distribution of
assets in a liquidation.
Rights of StockholdersRights of Stockholders
11-7
Paid-in Capital
Contributions byinvestors in exchange
for capita l stock.
Retained Earnings
Retention of profitsearned by thecorporation.
Stockholders' equity isincreased in tw o w ays.
Stockholders’ Equity of a Stockholders’ Equity of a CorporationCorporation
11-8
Preferred StockPreferred StockA separate class of stock, typically having
priority over common shares in . . . Dividend distributions (rate is usually stated).
Distribution of assets in case of liquidation.
Cumulative dividend rights.
Normally has no voting
rights.
Usually callable by
the company.
Other Features Include:
11-9
Accounting by the issuer.
Accounting by the investor.
Common stock is carried at original issue
price.
Investments in marketable securities are carried at market
value.
Market ValueMarket Value
11-10
Ice Cream Parlor
Stock SplitsNow
Available
Stock SplitsStock Splits Companies use
stock splits to reduce market price.
Outstanding shares increase, but par value is decreased proportionately.
11-11
When stock is reacquired, the corporation records the treasury stock at cost.
Treasury shares are
issued shares that have been reacquired
by the corporation.
Treasury StockTreasury Stock
11-12
Self-testing QuestionSelf-testing QuestionSolve the Demonstration problem
Brief Exercise 11.1, 11.2,11.3, 11.4,11.5Exercise 11.4
11-13
End of Chapter 11End of Chapter 11