INTRO TO FIN ACC
INTRO TO FIN ACC ACC 2361
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This 5 page Class Notes was uploaded by Miss Alexandrine Ortiz on Wednesday September 23, 2015. The Class Notes belongs to ACC 2361 at Texas State University taught by S. Ross in Fall. Since its upload, it has received 29 views. For similar materials see /class/212874/acc-2361-texas-state-university in Accounting at Texas State University.
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Date Created: 09/23/15
Chapter 11 o Authorized shares shares of stock that the company may sell as authorized by the state which grants the corporate charter o The number of shares authorized must be disclosed in the stockholders equity section of the balance sheet 0 Authorization of common stock does not result in a formal accounting entry 0 Issuing stock A corporation may sell its stock either directly to investors or indirectly to an investment banking rm 0 Accounting entry Cash Common Stock 0 Outstanding shares The number of shares of issued stocks that are being held by stockholders 0 Shares issued Treasury shares Outstanding shares 0 Treasury stock A corporation s own stock that has been reacquired by the corporation and is being held for future use 0 Treasury stockdoes not changetlie total number of stocks issued but the total dollar amount of stockholders equity decreases and the number of shares outstanding decreases 0 Journal entry Treasury stock 10000 Cash 10000 To reacquire 1000 shares at 10 per share 0 Par value capital stock that has been assigned a value per share in the corporate charter used for large stock dividends 0 Par value is an arbitrary amount that has absolutely nothing to do with the fair market value of the stock 0 Accounting entry Cash Amount of shares issued X Par value Common Stock Amount of shares issued X Par value Cash 500 Common Stock 500 To record sale of 100 shares of 5 par value stock at 5 per share Cash 700 Common Stock 500 Paidin Capital in 200 excess ofpar value To record sale of 100 shares of 5 par value stock sold at 7 0 Nopar value capital stock that has not been assigned a value in the corporate chapter 0 In some states the board of directors can is allowed to assign a stated value to nopar stock 0 Advantages and Disadvantages of Corporate structure 0 Advantages Separate legal existence I Limited liability of stockholders I Transferable ownership rights I Ability to acquire capital I Continuous life I Corporation management professional managers 0 Disadvantages I Corporation management separation of ownership and management I Govemment regulations I Additional taxes 0 Legal capital The amount of capital that must be retained in the business for the protection of corporate creditors 0 Legal capital is Whatever is credited in the common stock or preferred stock accounts Cash 700 Common Stock 500 Paid in Capital in 200 Excess of Par Value To record sale of 100 shares of 5 par value stock sold at 7 The LEGAL CAPITAL would be 500 o Calculating ending Retained earnings Beginning retained earnings Net income if net income is a loss Cash dividends Stock dividends ending retained earnings 0 Calculating Total Stockholders Eguity Common Stock Paid in Capital in Excess of Common stock Preferred stock Paid in Capital in Excess of Preferred stock Treasury Stock Retained earnings Total Stockholders Equity 0 Preferred stock has contractual that give it preference or priority over common stock in certain areas 0 Preferred stock is listed before common stock on the balance sheet because of its preferences in the areas of dividends and liquidation 0 Accounting entry Cash 15000 Preferred Stock 10000 Paidin capital in 5000 Excess of par value preferred sale of 500 shares of 20 par value stock for 30 dollars per share 0 The dividend amount of preferred stock is stated as a percentage of the par value or specified amount 39 Stock can be listed as 10 50 preferred meaning that each share receives 10 of 50 or 5 per share Also the stock can be listed as 5 preferred 50 Par Value 0 If the preferred stock is a cumulative dividend then any dividend that has not been declared and paid is forever lost Also known as preferred dividend in arrears this amount from previous unpaid dividends must be paid before the current dividends Preferred dividends in arrears 20000 Preferred dividends current year 10000 Common stock dividends 20000 Total dividends distributed 50000 0 Dividends distribution by a corporation to its stockholders on a pro rata basis 0 To pay a cash dividend a corporation must have retained earnings adequate cash and dividends declared by the board of directors o DATES FOR DIVIDENDS I Date of declaration journal entry Cash Dividends 25000 Dividends payable 25000 To declare a cash dividend of 25 per share on 100000 shares I Date of record requires no journal entry I Date of payment journal entry Dividends payable 25000 Cash 25000 To record payment of cash dividends 0 Small stock dividend occurs when the stock distributed is less than 2025 of the outstanding shares Fair market value is used for small stock dividends 0 Stock Splits Involves the issuance of additional shares of stock to stockholders according to their percentage ownership A stock split results in a reduction in the par or stated value per share 0 The purpose of a stock split is to reduce the market value per share thus making the stock more marketable o A stock split has no e ect on total paidin capital retained earnings and total stockholder s equity 0 No journal entry is required to record it
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