ADMN 2021H Lecture Notes - Lecture 7: Water Slide, Retained Earnings, Dividend Yield
28 Jun 2018
School
Department
Course
Professor
ADMN2021H: Financial Account II
Tuesday, February 27th, 2018
Lecture Week 7 (?) – Chapter 11 – Equity
Definition
Journal Entries
Formula
Example
Important
Objectives:
1. Identify an discuss the major characteristics of a corporation
2. Record share transactions
3. Prepare the entries for cash dividends, stock dividends, and stock splits, and understand their financial impact
4. Indicate how shareholders' equity is presented in the financial statements
5. Evaluate dividend and earnings performance
Advantages and Disadvantages of a Corporation
Advantages:
-Separate management and ownership
-Separate legal entity
-Limited liability of shareholders
-Ease of transferring ownership rights
-Ability to acquire capital
-Continuous life
Disadvantages:
-Increased costs and complexity in order to adhere to government regulation
-Increased reporting and disclosure requirements
-Separate management and ownership
Issuing Common Shares
-Contributed capital
oThe amount that shareholders have paid to the corporation for their shares
-Shares are usually issued for cash
-Shares can be issued in exchange for services or noncash assets
-IFRS: record at cash equivalent price (ideally the fair value of consideration received)
-ASPE: fair value of shares given up or fair value of consideration received (whichever is more reliable)
Reasons to Reacquire Shares
-Increase trading on securities markets
-Reduce number of shares issued (increases earnings per share and return on common shareholders' equity)
-Buyout hostile shareholders
-Have shares available for compensation or other uses
Reacquisition of Shares
-Reacquired shares are a corporation's own shares (either common or preferred) that had been previously issued
and later reacquired by the corporation
-Normally retired and cancelled
oRemoved from the share capital account
-Can also be held as treasury shares, for future resale, in limited circumstances
oOnly in some provinces and foreign jurisdictions
Preferred Shares
-Share capital can consist of preferred and common shares
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Identify an discuss the major characteristics of a corporation: record share transactions, prepare the entries for cash dividends, stock dividends, and stock splits, and understand their financial impact. Indicate how shareholders" equity is presented in the financial statements: evaluate dividend and earnings performance. Increased costs and complexity in order to adhere to government regulation. Contributed capital: the amount that shareholders have paid to the corporation for their shares. Shares can be issued in exchange for services or noncash assets. Ifrs: record at cash equivalent price (ideally the fair value of consideration received) Aspe: fair value of shares given up or fair value of consideration received (whichever is more reliable) Reduce number of shares issued (increases earnings per share and return on common shareholders" equity) Have shares available for compensation or other uses. Reacquired shares are a corporation"s own shares (either common or preferred) that had been previously issued and later reacquired by the corporation.
