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Transcript of 7Apx--1 College Accounting Heintz & Parry 20 th Edition.
7Apx--1
College
Accounting
College
Accounting
Heintz & ParryHeintz & Parry2020thth Edition Edition
Heintz & ParryHeintz & Parry2020thth Edition Edition
ChapterChapter 2020
Corporations: Organization and
Capital Stock
Corporations: Organization and
Capital Stock
1
Describe the
characteristics, formation,
and organization of a
corporation.
CORPORATIONSCORPORATIONS
• Sell more goods and services in total than sole proprietorships and partnerships combined– There are fewer businesses organized as
corporations• Is a separate legal entity that exists separate
from its owners– A corporation’s assets and liabilities are those
of the business, not the owners– A corporation can own property, enter into
contracts, and incur debt in its own name– It can sue and be sued
CHARACTERISTICSCHARACTERISTICS
LIMITED LIABILITY OF OWNERS
Owners of a corporation generally have no personal liability for the debts of the
corporation.
Major advantageof corporations
CHARACTERISTICSCHARACTERISTICS
TRANSFERABLE OWNERSHIP UNITS
Owner’s equity in a corporation is called capital stock. Capital stock is divided into shares that can be transferred from one person to another without the consent of the other owners and without disturbing the corporation’s normal activities.
CHARACTERISTICSCHARACTERISTICS
EASE OF RAISING CAPITALThe limited liability and transferable
ownership characteristics are attractive to investors. Therefore, a
corporation generally can obtain capital by selling additional shares of
stock.
CHARACTERISTICSCHARACTERISTICS
NO MUTUAL AGENCY
Unlike partnerships, in a corporation individual owners do not have the power
to act as an agent of the business.
CHARACTERISTICSCHARACTERISTICS
UNLIMITED LIFE
The corporation’s charter states the life as either perpetual or renewable.
Changes in ownership have no effect on
the life of a corporation.
CHARACTERISTICSCHARACTERISTICS
TAXATION OF EARNINGS
Corporations must pay income taxes. In addition, the corporation’s owners pay personal income tax on the dividends they receive. This results in “double
taxation.”
Disadvantage
CHARACTERISTICSCHARACTERISTICS
GOVERNMENT REGULATION
Activities of the corporation are regulated by federal, state, and local laws. These
laws may restrict the corporation’s ownership of real property, the purchase of its own stock, and the retention of its
earnings.
Disadvantage
CORPORATIONCORPORATION
• States have the power to create corporations– Incorporators file an application with the state– Once the application is approved, the charter,
also called a certificate of incorporation, is prepared, stating the:
• Name of the corporation• Location of the principal office• Purpose of the business• Description of the capital stock• Names and addresses of the incorporators
TERMINOLOGYTERMINOLOGY
• Bylaws – Provide general guidelines for conducting the business
• Stockholders – Owners in a corporation• Stock certificate – A form that shows the
name of the stockholder and the number of shares owned
• Board of directors – Elected by stockholders; determine corporate policies
• Officers – Manage the corporation and are responsible to the board
CORPORATE ORGANIZATIONCORPORATE ORGANIZATION
OWNERS(Stockholders)
Who elect the Who appoint the
OFFICERS (President,Vice President, Secretary,
Treasurer)
Who manage the EMPLOYEES
BOARD OFDIRECTORS
ORGANIZATION COSTSORGANIZATION COSTS
IncorporationFees
Attorneys’Fees
PromotionExpenses
EXAMPLES:
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Organization Expenses 8,000
8,000Accounts Payable (or Cash)
Organization costs are expensed when incurred and reported
under “Other expenses”on the income statement.
2
Describe stockholders’
equity and the types of
capital stock, and compute
dividends on preferred and
common stock.
EQUITY ACCOUNTSEQUITY ACCOUNTS
SOLE PROPRIETORSHIP
Owner, Capital Owner, Drawing
Two equity accounts
EQUITY ACCOUNTSEQUITY ACCOUNTS
SOLE PROPRIETORSHIP
Owner, Capital Owner, Drawing
All equity transactions eventuallyaffect the one capital account.
1. Investments2. Net income
2. Net loss 3. Drawing 4. Closing4. Closing
EQUITY ACCOUNTSEQUITY ACCOUNTS
PARTNERSHIP
Partner A, Capital Partner A, Drawing1. Investments2. Net income
2. Net loss 3. Drawing 4. Closing4. Closing
Partner B, Capital1. Investments2. Net income
2. Net loss4. Closing
Partner B, Drawing3. Drawing 4. Closing
A partnership is similar to a sole proprietorship buthas multiple capital and drawing accounts.
EQUITY ACCOUNTSEQUITY ACCOUNTS
CORPORATION
Capital Stock
Additional Paid-In Capital
1. Investments
1. Investments
Only recordsinvestments by owners
EQUITY ACCOUNTSEQUITY ACCOUNTS
CORPORATION
Capital Stock
Additional Paid-In Capital
1. Investments
Retained Earnings
1. Investments
A separate account which
records the earnings
of the corporation
2. Net income2. Net loss
EQUITY ACCOUNTSEQUITY ACCOUNTS
CORPORATION
Capital Stock
Additional Paid-In Capital
1. Investments
Retained Earnings
1. Investments
Corporations make a distinction
betweencapital invested by the owners (paid-in
capital)and earnings
retained in the business.
2. Net income2. Net loss
EQUITY ACCOUNTSEQUITY ACCOUNTS
CORPORATION
Capital Stock
Additional Paid-In Capital
1. Investments
Retained Earnings
1. Investments
Dividends
Drawings are now called Dividends and are closed to Retained
Earnings.
2. Net income2. Net loss4. Closing
4. Closing 3. Dividends
CAPITAL STOCKCAPITAL STOCK
• Authorized stock – The total number of shares the corporate charter authorizes a corporation to issue
• Issued stock – Stock that has been sold and issued
• Treasury stock – Stock that has been bought back
• Outstanding stock – Number of shares in the hands of stockholders
STOCK VALUESSTOCK VALUES
Par ValueDollar amount
printed on stock
certificateRecorded in the capital stock
account
Market ValueAmount for which the
stock can be sold
No-Par StockNo dollar amount
printed on it
Amount assigned by
board of directors
Stated Value
COMMON STOCKCOMMON STOCK
• If a corporation has only one type of stock, it is called “common stock”
• Gives its owner the right to:– Vote at stockholder meetings– Share in earnings distributions– Purchase additional shares in
proportion to the owner’s present holding if more shares are issued
• Called the “preemptive right”
– Share in the assets if the corporation liquidates
PREFERRED STOCKPREFERRED STOCK
• Type of stock that gives its owners certain rights and privileges superior to those of common stockholders– Example: The right to receive dividends
before common stockholders• Dividends are stated as a dollar amount or
a percent of par value
• Does not give the same rights as common stock– Example: Preferred stockholders do not
have the right to vote
DIVIDEND ALLOCATIONDIVIDEND ALLOCATION
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common
stock outstanding. The amount available for dividends for the year is
$14,000.Preferred Stockholders
Common Stockholders
$8,000
$4 dividend for each share of preferred stock
(2,000 shares)
DIVIDEND ALLOCATIONDIVIDEND ALLOCATION
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common
stock outstanding. The amount available for dividends for the year is $14,000.
Preferred Stockholders
CommonStockholders
$8,000$14,00
0Available for dividends– 8,000For preferred stockholders$
6,000Leftover for the common shareholders
$6,000
DIVIDEND ALLOCATIONDIVIDEND ALLOCATION
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common
stock outstanding. The company declared no dividends in year 1 and
$22,000 in year 2.Preferred Stockholders
Common Stockholders
Depends on the type of preferred stock…
cumulative or noncumulative
Should we go back and give the preferred stockholders the dividend for year 1?
DIVIDEND ALLOCATIONDIVIDEND ALLOCATION
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common
stock outstanding. The company declared no dividends in year 1 and
$22,000 in year 2.Preferred Stockholders
Common Stockholders
Cumulative preferred stock accumulates unpaid dividends
from year to year.
$ 8,000 Year 1
8,000 Year 2
DIVIDEND ALLOCATIONDIVIDEND ALLOCATION
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares
of $10 par common stock outstanding. The company declared no dividends in year 1 and
$22,000 in year 2.Preferred
StockholdersCommon
Stockholders
Preferred stockholders receive both
years’ dividends before commonstockholders receive any
dividends.
$ 8,000 Year 1
8,000 Year 2
$16,000
$6,000$22,000
– 16,000
DIVIDEND ALLOCATIONDIVIDEND ALLOCATION
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common
stock outstanding. The company declared no dividends in year 1 and
$22,000 in year 2.PreferredStockholders
CommonStockholders
Noncumulative preferred stock does
not carry dividends from year to year.
$8,000 Year 2 $14,000$22,000
– 8,000
PARTICIPATING PREFERRED STOCKPARTICIPATING PREFERRED STOCK
• Gives owners the right to share with common stock owners in dividends in excess of a stated dividend rate– Rare to find anymore
• Nonparticipating preferred stock limits the preferred stock owners to the stated dividend rate
3
Account for capital stock
transactions.
CAPITAL STOCK TRANSACTIONSCAPITAL STOCK TRANSACTIONS
• Corporations issue capital stock in exchange for cash and noncash assets. – Issuance for cash is the most common
transaction– Stock may be issued:
• At par• At a premium• At a discount
Let’s look at some examples.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
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Cash 50,000
50,000Common Stock
Linc Corp. issues 10,000 shares
of $5 par common stock at par
for $50,000 cash.
Issued common stock at par
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 60,000
Common Stock
What if the stock had been issued for $60,000 cash?
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 60,000
Common Stock
Shares issued Par value(10,000 shares $5 par
value)
50,000
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 60,000
Common Stock
Extra received above par value
50,000
Paid-In Capital in Excess of
Par—Common Stock 10,000
Issued common stock at a
premium
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 96,000
4,000
Preferred Stock
Linc Corp. issues 2,000 shares
of $50 par, 8% preferred stock
for $96,000 cash.
Issued preferred stock at
Discount on Preferred Stock
100,000
a discount
DISCOUNTSDISCOUNTS
• Seldom used because:– Firms generally set very low par values– The purchaser is liable to the
corporation’s creditors for the difference between the par value and the amount paid
– Illegal in many states
STATED VALUE STOCKSTATED VALUE STOCK
EXAMPLE: Stat Company issued 5,000 shares of no-par common stock with a
stated value of $10 per share for $70,000 cash.
Stock may have a stated value instead of a par value. Accounting for stated value is very similar to par value, but with a
few account title changes.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 70,000
Common Stock
Shares Stated value per share
50,000
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 70,000
Common Stock 50,000
Paid-In Capital in Excess of
Stated Value—Common Stk. 20,000
Slight change in thetitle of the account
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 70,000
Common Stock
EXAMPLE: Noll Company issued
5,000 shares of no-par common
stock for $70,000.
70,000
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GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 70,000
Common Stock
Common Stock is creditedfor entire amount received.A paid-in capital in excess of
par account is not used.
70,000
STOCK ISSUED FOR NONCASH ASSETS
STOCK ISSUED FOR NONCASH ASSETS
• Guideline:– The assets received are recorded at the
fair market value of the assets or of the stock, whichever can be more clearly determined
STOCK ISSUED FOR NONCASH ASSETS
STOCK ISSUED FOR NONCASH ASSETS
EXAMPLE: Linc Corp. issues 5,000 shares of $5 par common stock for a
truck. It is hard to determine the market value of the stock, but the truck has a
known market value of $30,000.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Truck 30,000
Common Stock
The truck is recorded at its fair market value.
Common Stock is recorded at par.Paid-In Capital is credited for the
difference.
25,000
Paid-In Capital in Excess
of Par—Common Stock 5,000
STOCK SUBSCRIPTIONSSTOCK SUBSCRIPTIONS
• An agreement in which a buyer (subscriber) contracts to buy shares of stock from a corporation at a specific price
– The subscriber generally agrees to pay the amount in full on a specified date or in installments
– The stock is not issued until the subscriber makes the full payment
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GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Stock Subscriptions Receivable 60,000
Common Stock Subscribed
EXAMPLE: Linc Corp. received subscriptions for 10,000 shares
of its $5 par common stock for
$60,000.
50,000
Paid-In Capital in Excess
of Par—Common Stock 10,000
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Stock Subscriptions Receivable 60,000
Common Stock Subscribed
EXAMPLE: Partial payment is received.
50,000
Paid-In Capital in Excess
of Par—Common Stock 10,000
Cash
Stock Subcriptions Receivable
40,00040,000
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
12
13
14
15
16
17
18
19
20
21
22
EXAMPLE: Final payment is received.
Cash
Stock Subscriptions Receivable
20,00020,000
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
12
13
14
15
16
17
18
19
20
21
22
Stock is issued.
Common Stock Subscribed 50,000
Common Stock 50,000
TREASURY STOCKTREASURY STOCK
• When a company buys back its own stock, it’s called “treasury stock”
• When treasury stock is purchased:– Treasury Stock is debited for the
amount paid regardless of par value– Treasury stock account is a contra-
stockholders’ equity account
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GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Common Treasury Stock 18,000
Cash
EXAMPLE: Linc Corp purchases 3,000 shares of its $5 par common stock for $6 per share, a total of $18,000.
18,000
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GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Common Treasury Stock 18,000
Cash
EXAMPLE: Linc Corp sells 2,000 of the 3,000 treasury shares
for $7 per share, a total of $14,000.
18,000
Cash 14,000
Common Treasury Stock
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Common Treasury Stock 18,000
Cash
2,000 shares $6 per share
18,000
Cash 14,000
Common Treasury Stock 12,000
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Common Treasury Stock 18,000
Cash 18,000
Cash 14,000
Common Treasury Stock 12,000
Paid-In Capital from Sale
of Treasury Stock 2,000
Paid-In Capital from Sale of Treasury Stock is
credited for the difference.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENERAL JOURNALGENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
12
13
14
15
16
17
18
19
20
21
22
Cash
Paid-In Capital from Sale
5,500
500
Common Treasury Stock 6,000
of Treasury Stock
Linc sells the remaining 1,000treasury shares for $5.50
per share, a total of $5,500. In this case, Paid-In Capital from
Sale of Treasury Stock is debited.
REVIEW OF NEW ACCOUNTSREVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Common Stock and Preferred Stock
Stockholders’ Equity
PURPOSE:
Credited for the par or stated value (if stated). If no-par or stated value,
credited for the amount received for stock issued
BALANCE SHEET PRESENTATION:
Part of paid-in capital
REVIEW OF NEW ACCOUNTSREVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Paid-In Capital in Excess of Par (or Stated Value)—Common (or Preferred)
Stock
Stockholders’ Equity
PURPOSE:Credited for the amount by which the issue price exceeds the par or stated value (not
used when issuing no-par stock)
BALANCE SHEET PRESENTATION:
Addition to paid-in capital
REVIEW OF NEW ACCOUNTSREVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Discount on Common (or
Preferred) Stock
Contra-Stockholders’
EquityPURPOSE:
Debited for the amount by which the par or stated value exceeds the issue price
BALANCE SHEET PRESENTATION:
Deduction from paid-in capital
REVIEW OF NEW ACCOUNTSREVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Common (or Preferred) Stock Subscriptions
Receivable
Contra-Stockholders’
Equity
PURPOSE:
Debited for the subscription price of stock
BALANCE SHEET PRESENTATION:
Deduction from the total of paid-in capital and retained earnings
REVIEW OF NEW ACCOUNTSREVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Common (or Preferred)
Stock Subscribed
Stockholders’ Equity
PURPOSE:
Credited for the par or stated value (if stated) of the stock subscribed. If no-par or stated value, credited for the amount
of stock subscriptionBALANCE SHEET PRESENTATION:
Addition to paid-in capital
REVIEW OF NEW ACCOUNTSREVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Treasury Stock—Common and
Preferred
Contra-Stockholders’
EquityPURPOSE:
Debited for the cost of stock purchased
BALANCE SHEET PRESENTATION:
Deduction from the total of paid-in capital and retained earnings
REVIEW OF NEW ACCOUNTSREVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Paid-In Capital from Sale of Treasury
Stock
Stockholders’ Equity
PURPOSE:
Credited for the excess of the selling price over cost. Debited for the excess of
cost over the selling price
BALANCE SHEET PRESENTATION:
Addition to paid-in capital
4
Prepare the stockholders’
equity section of a
corporation balance sheet.
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Paid-In Capital and Retained Earnings
Equity is separated by source:Paid-In Capital = Amounts contributed by
ownersRetained Earnings = Accumulated,
undistributed earnings
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Paid-in capital:Preferred stock, 7%, $10 par(20,000 shares auth., 14,000 shares issued)
Preferred stock subscribed (6,000 shares)$140,000
60,000 $200,000
Preferred stock is listed firstbecause of its preferred
claimto dividends and assets.
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Paid-in capital:Preferred stock, 7%, $10 par(20,000 shares auth., 14,000 shares issued)
Preferred stock subscribed (6,000 shares)
Common stock, no par(40,000 shares auth., 16,300 shares issued)
Common stock subscribed (4,000 shares)
Additional paid-in capital:Paid-in capital in excess of par—preferredPaid-in capital from sale of treasury stock
Total paid-in capital
$140,00060,000 $200,000
$163,00040,000 203,000
$56,000600 56,600
$459,600
Paid-in capital is further separated by source…
Preferred, common, subscriptions, etc.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Paid-in capital:Preferred stock, 7%, $10 par(20,000 shares auth., 14,000 shares issued)
Preferred stock subscribed (6,000 shares)
Common stock, no par(40,000 shares auth., 16,300 shares issued)
Common stock subscribed (4,000 shares)
Additional paid-in capital:Paid-in capital in excess of par—preferredPaid-in capital from sale of treasury stock
Total paid-in capital
$140,00060,000 $200,000
$163,00040,000 203,000
$56,000600 56,600
$459,600
Stock characteristics are indicated:Dividend rate for preferred par or no-par
value
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Paid-in capital:Preferred stock, 7%, $10 par(20,000 shares auth., 14,000 shares issued)
Preferred stock subscribed (6,000 shares)
Common stock, no par(40,000 shares auth., 16,300 shares issued)
Common stock subscribed (4,000 shares)
Additional paid-in capital:Paid-in capital in excess of par—preferredPaid-in capital from sale of treasury stock
Total paid-in capital Retained earnings
$140,00060,000 $200,000
$163,00040,000 203,000
$56,000600 56,600
$459,60060,000
$519,600Retained earnings is listed
after all paid-in capital.
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Paid-in capital:
Total paid-in capital Retained earnings
Less: Preferred stock subscriptions receivable
Total stockholders’ equity
$459,60060,000
$519,600
22,000$447,600
Number of shares authorized,
subscribed, issued, and held
as treasury are indicated.
Common treasury stock (2,000 shares at cost)
Common stock subscriptions receivable$20,000
30,00072,000
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Paid-in capital:
Total paid-in capital Retained earnings
Less: Preferred stock subscriptions receivable
Total stockholders’ equity
$459,60060,000
$519,600
22,000$447,600
Common treasury stock (2,000 shares at cost)
Common stock subscriptions receivable$20,000
30,00072,000
Preferred and common stock subscriptions
receivable are subtracted from total paid-in capital and retained
earnings.
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Paid-in capital:
Total paid-in capital Retained earnings
Less: Preferred stock subscriptions receivable
Total stockholders’ equity
$459,60060,000
$519,600
22,000$447,600
Common treasury stock (2,000 shares at cost)
Common stock subscriptions receivable$20,000
30,00072,000
Treasury stock is subtracted from total paid-in capital
and retained earnings.