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8/9/2019 Stockholders' Equity -No 1.ppt
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12-1
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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12-.
/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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Capital %toc4Capital %toc4
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
%toc4 Certiicate%toc4 Certiicate
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Capital %toc4Capital %toc4
100 Shares
No-par value
VidTel, Inc.
Common Stock
>o-par stoc4 has no par or stated (alue"
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12-1.
Capital %toc4Capital %toc4
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"
%toc4 Certiicate%toc4 Certiicate
12 10
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Capital %toc4Capital %toc4
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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Capital %toc4Capital %toc4
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"
12-2:
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Capital %toc4Capital %toc4
/ssued
shares areauthorizedshares ostoc4 thatha(e been
sold"
Bnissued
shares areauthorizedshares ostoc4 thatha(e ne(erbeen sold"
Authorized%hares
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Capital %toc4Capital %toc4
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" &::$::: D .::$:::
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" &::$::: D .::$:::
12-2'
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12 2'
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" &::$::: D .::$:::
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" &::$::: D .::$:::
uestionuestion
/ssued 0::$:::
Reac5uired 1::$:::
utstanding .::$:::
Authorized 1$:::$:::
/ssued 0::$:::
Bnissued &::$:::
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12 2&
Classes o Capital %toc4Classes o Capital %toc4
Co!!on %toc4
Residual E5uity - all other clai!s againstcorporation6s assets$ 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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12 2.
Classes o Capital %toc4Classes o Capital %toc4
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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Classes o Capital %toc4Classes o Capital %toc4
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&
12-''
% 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
12-'&
% 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"
12-'.
%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:$::: shares o 2: par (alueco!!on stoc4 were sold or cash o 2. per share"
E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit
12-'0
% C%t 4 / d C h
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%toc4 /ssued or Cash%toc4 /ssued or CashPar ;alue Exa!plePar ;alue Exa!ple
n %epte!ber 1st$ 1:$::: shares o 2: par (alueco!!on stoc4 were sold or cash o 2. per share"
E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit
9N1 Cash 2.:$:::
Co!!on %toc4 2::$:::
Paid-in Capital in Excess o Par ;alue .:$:::
To record issuance o stoc4 or cash
12-'3
% 4 / d C h%t 4 / d C h
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E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit
9N1 Cash 2.:$:::
Co!!on %toc4 2::$:::
Paid-in Capital in Excess o Par ;alue .:$:::
To record issuance o stoc4 or cash
%toc4 /ssued or Cash%toc4 /ssued or CashPar ;alue Exa!plePar ;alue Exa!ple
n %epte!ber 1st$ 1:$::: shares o 2: par (alueco!!on stoc4 were sold or cash o 2. per share"
%hares
,ollars per
share Total
Cash 1:$::: 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"
E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit
12-'9
%t 4 / d C h%t 4 / d C h
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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"
E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit
9N1 Cash 2.:$:::
Co!!on %toc4 2::$::: Paid-in Capital in
Excess o %tated ;alue .:$:::
To record issuance o stoc4 or cash
12-&:
%t 4 / d C h%t 4 / d C h
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E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit
9N1 Cash 2.:$:::
Co!!on %toc4 2::$::: Paid-in Capital in
Excess o %tated ;alue .:$:::
To record issuance o stoc4 or cash
n %epte!ber 1st$ 1:$::: shares o no-par$ 2:stated (aluestated (alue co!!on stoc4 were sold or cash o
2. per share"
%toc4 /ssued or Cash%toc4 /ssued or Cash%tated ;alue Exa!ple%tated ;alue Exa!ple
%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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E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit9N1 Cash 2.:$:::
Co!!on %toc4 2.:$:::
To record issuance o stoc4 or cash
%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:$::: shares o no-par (alueno-par (alueco!!on stoc4 were sold or cash o 2. per share"
12-&'
%t 4 / d %toc4 /ss ed or
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%toc4 /ssued or%toc4 /ssued or
Property or %er(icesProperty or %er(ices
Record transaction at air (alue oproperty or ser(ices recei(ed or air(alue o stoc4 issued$ whiche(er is
!ore clearly e(ident"
)air (alueo property
)air (alue
o stoc4
12-&&
%t 4 / d %toc4 /ssued or
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E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit
n ay 1st$ 1:$::: shares o 2: par (alue stoc4were exchanged or land (alued at '.:$:::"
%toc4 /ssued or%toc4 /ssued or
Property or %er(icesProperty or %er(ices
@e do not 4now the air (alue o thestoc4 issued because it is notacti(ely traded in the !ar4et"
12-&.
%t 4 / d %toc4 /ssued or
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E>ERA+ LBR>A+ Page: 1
Date Description PR Debit Credit
%toc4 /ssued or%toc4 /ssued or
Property or %er(icesProperty or %er(ices
.N1 +and '.:$:::
Co!!on %toc4 2::$:::
Paid-in Capital in Excess o Par 1.:$:::
n ay 1st$ 1:$::: shares o 2: par (alue stoc4were exchanged or land (alued at '.:$:::"
12-&0
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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"
12-&3
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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
12-&7
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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