專業(yè)英語課件chap011notes

STOCKHOLDERS’EQUITY:PAID-INCAPITALChapter

11Existenceisseparatefromowners.Anentitycreatedbylaw.Hasrightsandprivileges.Privately,orClosely,HeldPubliclyHeldOwnershipcanbeCorporationsLimitedpersonalliabilityforstockholders.Transferabilityofownership.Professionalmanagement.Continuityofexistence.AdvantagesofIncorporationHeavytaxation.Greaterregulation.Costofformation.Separationofownershipandmanagement.DisadvantagesofIncorporationPubliclyOwnedCorporationsFaceDifferentRules

ByLAW,publiclyownedcorporationsmust:PreparefinancialstatementsinaccordancewithGAAP.HavetheirfinancialstatementauditedbyanindependentCPA.Complywithfederalsecuritieslaws.SubmitfinancialinformationforSECreview.Thecostsassociatedwithincorporationareusuallyexpensedimmediately,butamortizedover5yearsfortaxpurposes.FormationofaCorporationEachcorporationisformedaccordingtothelawsofthestatewhereitislocated.TheapplicationforcorporatestatusiscalledtheArticlesofIncorporation.StockholdersRightsVoting(inpersonorbyproxy).Proportionatedistributionofdividends.Proportionatedistributionofassetsinaliquidation.RightsofStockholdersUltimatecontrolStockholdersusuallymeetonceayear.RightsofStockholdersUltimatecontrolStockholdersusuallymeetonceayear.Stockholderledgersareoftenmaintainedbyastocktransferagentorstockregistrar.RightsofStockholdersEachunitofownershipiscalledashareofstock.Astockcertificateservesasproofthatastockholderhaspurchasedshares.RightsofStockholdersWhenthestockissold,thestockholdersignsatransferendorsementonthebackofthestockcertificate.RightsofStockholdersOverallresponsibilityformanagingthecompany.SelectedbyavoteofthestockholdersFunctionsoftheBoardofDirectorsChiefAccountantContractualandlegalrepresentationCustodianoffundsFunctionsoftheCorporateOfficersStockholders’EquityofaCorporationThemaximumnumberofsharesofcapitalstockthatcanbesoldtothepublic.AuthorizedSharesAuthorizationandIssuance

ofCapitalStockIssuedsharesareauthorizedsharesofstockthathavebeensold.Unissuedsharesareauthorizedsharesofstockthatneverhavebeensold.Usuallysharesaresoldthroughanunderwriter.AuthorizedSharesAuthorizationandIssuance

ofCapitalStockUnissuedSharesTreasurySharesOutstandingSharesTreasurysharesareissuedsharesthathavebeenreacquiredbythecorporation.IssuedSharesOutstandingsharesareissuedsharesthatareownedbystockholders.AuthorizedSharesAuthorizationandIssuance

ofCapitalStockParvalueisanarbitraryamountassignedtoeachshareofstockwhenitisauthorized.Marketpriceistheamountthateachshareofstockwillsellforinthemarket.Stockholders’EquityCommonstockcanbeissuedinthreeforms:No-ParCommonStockParValueCommonStockStatedValueCommonStockLet’sexaminethisformofstock.AllproceedscreditedtoCommonStockTreatedlikeparvaluecommonstockStockholders’EquityPreparethejournalentrytorecordanissuanceof10,000sharesof$2parvaluestockfor$25persharewhichoccurredonSeptember1,2005.Record:Thecashreceived.Thenumberofsharesissued×theparvaluepershareintheCommonStock

account.TheremainderisassignedtoContributedCapitalinExcessofPar.IssuanceofParValueStockThejournalentrytorecordanissuanceof10,000sharesof$2parvaluestockfor$25pershareonSeptember1,2005,shouldincludeacredittocommonstockfortheparvalueofthesharesissued.IssuanceofParValueStockIssuanceofParValueStockAseparateclassofstock,typicallyhavingpriorityovercommonsharesin...Dividenddistributions(rateisusuallystated).Distributionofassetsincaseofliquidation.Cumulativedividendrights.Normallyhasnovotingrights.Usuallycallablebythecompany.OtherFeaturesInclude:PreferredStockVs.NoncumulativeCumulativeDividendsinarrearsmustbepaidbeforedividendsmaybepaidoncommonstock.Undeclareddividendsfromcurrentandprioryearsdonothavetobepaidinfutureyears.CumulativePreferredStockExample:ConsiderthefollowingpartialStatementofStockholders’Equity.During2004,thedirectorsdeclarecashdividendsof$5,000.Inyear2005,thedirectorsdeclarecashdividendsof$42,000.StockPreferredastoDividendsExample:ConsiderthefollowingpartialStatementofStockholders’Equity.During2000,thedirectorsdeclarecashdividendsof$5,000.Inyear2001,thedirectorsdeclarecashdividendsof$42,000.StockPreferredastoDividendsIjustconverted100sharesofpreferredstockinto1,000sharesofcommonstockandendedupwithahigherdividendyield!Gee,Ican’tdothatwithMYpreferredstock!Somepreferredstockisconvertibleintosharesofcommonstock.OtherFeaturesofPreferredStockPreferredStockIlovethisstuff!Canwedosomemore?Accountingbytheissuer.Accountingbytheinvestor.Commonstockiscarriedatoriginalissueprice.Investmentsinmarketablesecuritiesarecarriedatmarketvalue.MarketValue

Factorsaffectingmarket

priceofpreferredstock:DividendrateRiskLevelofinterestratesThereturnbasedonthemarketvalueiscalledthe“dividendyield.”MarketPriceofPreferredStock

Factorsaffectingmarketpriceofcommonstock:Investors’expectationsoffutureprofitability.Riskthatthislevelofprofitabilitywillnotbeachieved.Changesinmarketvaluehavenoimpactonthebooksoftheissuer.MarketPriceofCommonStockBookValueperShare

ofCommonStockTotalStockholders’EquityNumberofCommonSharesOutstandingPreferredstockandpreferred

dividendsinarrearsarededucted

fromtotalstockholders’equity.BookValueMarketValue=IceCreamParlorBananaSplitsOnSaleNowStockSplitsCompaniesusestocksplitstoreducemarketprice.Outstandingsharesincrease,butparvalueisdecreasedproportionately.Assumethatacorporationhad5,000sharesof$1parvaluecommonstockoutstandingbeforea2–for–1stocksplit.Inc