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MGAB01H3 Lecture : Accounting for Common Share Issues

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ochretortoise616
10 Nov 2010
School
UTSC
Department
Financial Accounting
Course
MGAB01H3
Professor
Liang Chen

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MGAB01H3 Full Course Notes
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MGAB01H3 Full Course Notes
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Document Summary

The primary objectives in accounting for the issue of common shares are to identify the specific sources of contributed capital and maintain the distinction between contributed capital and retained earnings. The issue of common shares affects only contributed capital accounts. Issuing no par value shares for cash: shares are most commonly issued in exchange for cash. When no par value common shares are issued, the entire proceeds from the issue become legal capital. Issuing stated value shares for cash: stated value does not ind. ,90,8,7082,709;,:0 . The cash proceeds from issuing stated value shares may be equal to or greater than stated value. The proceeds cannot be less than stated value, since it is prohibited to issue shares at less than stated value. When the issue of common shares for cash is recorded, the stated value of the shares is credited to the common shares account. The portion that is above stated value is recorded in a separate contributed capital account.

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Related Questions

Radko Inc. had the following transactions related to its common and preferred shares:

January 15 Issued 350,000 no par common shares for $15 per share. Issued 5,000 $20 stated value preferred shares at $23 per share.
November 29 Repurchased and cancelled 30,000 common shares at $21 per share.

Required:

Prepare the journal entries for these transactions. For a compound transaction, for those boxes in which no entry is required, leave the box blank.

Jan. 15 Cash
Common Shares
Preferred Shares
Contributed Surplus-Preferred Shares
(Record sale of preferred and common shares)
Nov. 29 Common Shares
Retained Earnings
Cash
(Record purchase and cancellation of common shares)
Kilgore Auto Parts reported the following information at December 31, 2004:Preferred stock, 10%, $50 par, cumulative;$ 50,000Common stock, $1 par, 40,000Additional paid-in capital - Common50,000Retained earnings 30,000Total contributed capital and retained earnings$170,000Less: Treasury stock (100 common shares at cost) (5,000) Total stockholders' equity$165,000_____________ 1. How many shares of common stock are issued?_____________ 2. How many shares of preferred stock are issued?_____________ 3. How many common shares are outstanding?_____________ 4. What is the dividend per share that preferred shareholders

On May 23, Stoltz Realty Inc. issued for cash 80,000 shares of no-par common stock (with a stated value of $3) at $12. On July 6, Stoltz Realty Inc. issued at par value 18,000 shares of preferred 1% stock, $50 par for cash. On September 15, Stoltz Realty Inc. issued for cash an additional 50,000 shares of no-par common stock (with a stated value of $3) for $15. Journalize the entries to record the May 23, July 6, and September 15 transactions. Refer to the Chart of Accounts for exact wording of account titles.