ACCT1021 Lecture 21: Chapter Eleven Lecture Notes (21&22)

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greywildebeest867

3 Dec 2016

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Stockholders" equity - terminology: the corporation"s stockholders" equity consists of three major components: We will focus only on the first two components. Note that retained earnings does not represent any cash or assets, it merely represents a source of assets: authorized shares of stock: the maximum number of shares of stock a corporation can issue. This is first established when the company files its articles of incorporation. This number will be less than than the authorized shares at any time. Note that you usually do not issue all your authorized stock at the beginning. Depending on your capital needs, the number of issued shares may increase over time: outstanding shares of stock: total number of shares of stock actually owned by outsiders, i. e. , parties other than the corporation itself. We make this distinction from the issued shares because a company may buy its own shares of stock.

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The stockholders' meeting for Percival Corporation has been in progress for some time. The chief financial officer for Percival is presently reviewing the company's financial statements and is explaining the items that comprise the stockholders' equity section of the balance sheet for the current year. The stockholders' equity section of Percival Corporation at December 31, 2017, is as follows.

Percival Corporation

Balance Sheet (partial)

December 31, 2017

Paid in Capital

Capital Stock

Preferred stock, authorized 1,000,000 shares

Cumulative, $100 par value, $8 per share, 6000

Shares issued and outstanding $600,000

Common stock, authorized 5,000,000 shares, $1 par

Value, 3,000,000 shares, issued and 2,700,000 outstanding 3,000,000

Total Capital stock 3,600,000

Additional paid in capital

In excess of par- preferred stock $50,000

In excess of par- common stock 25,000,000

Total additional pain in capital 25,050,000

Total paid in capital 28,650,000

Retained Earnings 900,000

Total paid in capital and retained earnings 29,550,000

Less: Treasury Stock (300,000 common shares) 9,300,000

Total Stockholderâs equity $20,250,000

At the meeting, stockholders have raised a number of questions regarding the stockholders' equity section.

Instructions

With the class divided into groups, answer the following questions as if you were the chief financial officer for Percival Corporation.

(a) âWhat does the cumulative provision related to the preferred stock mean?â

Answer:

(b) âI thought the common stock was presently selling at $29.75, but the company has the stock stated at $1 per share. How can that be?â

Answer:

(c) âWhy is the company buying back its common stock? Furthermore, the treasury stock has a debit balance because it is subtracted from stockholders' equity. Why is treasury stock not reported as an asset if it has a debit balance?â

tansea-lion817

Shelby Corporation was organized in January 2013 to operate anair conditioning sales and service business. The charter issued bythe state authorized the following capital stock:

Common stock, $1 parvalue, 200,000 shares.

Preferred stock, $10par value, 6 percent, 50,000 shares.

During January andFebruary 2013, the following stock transactions werecompleted:

a.	Collected $841,000 cash andissued 29,000 shares of common stock.
b.	Issued 19,500 shares ofpreferred stock at $39 per share; collected in cash.

Net income for 2013 was $59,000;cash dividends declared and paid at year-end were $10,000.

Required:

Prepare the stockholdersâ equity section of the balance sheet atDecember 31, 2013.

This is what i have

Contributed capital

Preferred stock issued [19500*10] 195000

Additional preferred stock paid in capital [19500*29] 565500

Common stock issued [29000*1] 29000

Additional common stock paid in capital 812000

Total Contributed Capital 1601500

What are the retained earnings/net income

and the total stockholders equity?

Its not add: Net Income 59000

Less: dividends (10000)

I tried that and it didnt work. where am I going wronghere?

chocolateporpoise530

Match the items below by entering the appropriate answer letter choice from the column provided on the right.

	1.Net income retained in the corporation.
	2. Creditors cannot go after stockholderâs personal assets to satisfy their claims.
	3. Retained earnings currently unavailable for dividends.
	4. A corporationâs own stock that has been reacquired by the corporation.
	5. Responsible to stockholders for corporate activity.
	6. The amount assigned to each share of stock in the corporate charter.
.	7. The date the board of directors formally declares the dividend and announces it to stockholders.
	8. A debit balance in retained earnings.
	9. Capital contributed by stockholders.
	10. The death of a stockholder or employee does not affect the going concern of the corporation.
	11. The company determines ownership of the outstanding shares for dividend purposes.
	12. Unit of ownership in a corporation.
-	13. This type of dividend for the stockholder results in more shares of stock, but no change in ownership interest.
	14. The issuance of additional shares of stock to stockholders accompanied by a reduction in the par or stated value per share. This stock transaction does not require an accounting entry.
	15. The acts of the owners (stockholders) do not bind the corporation.

A.	Par value
B.	Record date
C.	Retained Earnings
D.	Indefinite life
E.	Treasury stock
F.	Stock split
G.	Declaration date
H.	Retained Earnings restrictions
I.	Stock dividend
J.	Capital stock
K.	Deficit
L.	Paid-in capital
M.	Cash dividend
N.	Board of directors
O.	Separate legal entity
P.	Limited liability

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ACCT1021 Lecture 21: Chapter Eleven Lecture Notes (21&22)

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