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Lecture 2

ACTG 3120 Lecture Notes - Lecture 2: Share Capital, Capital Account, Issued Shares

Course Code
ACTG 3120
Elizabeth Farrell

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Week 2 – Shareholder equity
No need to do journal entryeis for tresuery shares
Note disclose dividends and errers-
Multi-voting shares- common for family owned private companies that went public
Telus to end non-coting C share class:
Prices fluctuating
Prices not attractive
Restrictions lifted by the government of foreign investment, so no point in shares
Common Shares: must right to vote and the right to receive residual interest in the net assets of
the company on dissolution
Preferred shares: Priority claims on dividends declared
May have:
Limited or non-existent voting right
Dividend priority: Get dividends before any common shareholders do, must specify amt
Cumulative dividends: (aka Dividends in arrears), paid for dividends that weren’t paid in
prior years before common shareholders dividends
Participating dividends: right to additional dividends with common shares after base
dividend received for C/S and P/S
Assets upon liquidation: On dissolution priority on assets up to a stated amount per share
Conversion: right to convert to C/S or other classes of P/S
Guarantee: guaranteed return on their invested principal at some point in time through
redemption or retraction provisions
Restricted Shares: Have no voting rights
Par Value Shares: designated dollar amount per share
Can be C/S or P/S
When issues, if above par value (premium) excess goes to share capital account
No-par shares: no par value, thus wole amount goes in share capital account
Share capital chracteristics:
Authorized share capital: max # of shars that can be legally issued
Issued share capital: # of shares issued to date
Oustanding share capital: # of shares that have been issued and are currently outstanding
(difference is treasurey shares)

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oRetired shares do not count
Treasuery Shares/stock: shares reaquired by the cororation
oCant vote or claim dividends
oMust immediately retire those shares
Subscribed shares: Unissued shares (issued once the shares have been fully paid and not
on credit)
When Issuing Shares:
Authorization: a memo in the general journal declaring
oEx. Common shares- No par value (authorized unlimited shares)
Issued for Cash – Dr. Cash Cr. C/S
Issued on Subscription:
oStock Subscription: when payment is due on 1 or more specified future dates
Dr. Stock subscription recievable
Cr. C/S subscribed
oPartial Payment:
Dr. Cash
Cr. Stock subscription recieveable
oWhen all paid
Dr. C/S Shares subscribed
Cr. C/S
oDefault options:
1) return all payments
2) issue shares = payments so far
3) keep money and be a douche
No dividends until shares are fully paid for
Share based payments: Issue shares for non-cash items
oFV of the assets received –reliability determined
oUnless Shares FV is more reliable
Basket Sale: lump sum for multiple classes of shares
o1) proportional method based on relative FV of each
o2) incremental method –FV of 1 security then te rest to the other when other share
class has no FV
o3)arbitrary allocation when no FV for both classes
Share Based Payments: the FV of the shares given up – unless asset is more clearly determinable
Share Issue Costs:
Costs associated with issuing shares
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