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AMIS 211CHAPTER 11 - LECTURE NOTES

STOCKHOLDERS' EQUITY

1. Paid-In Capital - Investments contributed by shareholders.A. Stock IssuanceB. Sale of Treasury Stock C. Donated CapitalD. Redemption of Corporation's Own Stock 2. Retained Earnings - Earnings retained in the business.II.

TERMS

Capital Stock

- Shares of ownership in the corporation.B.

Stock Outstanding

- Stock held by shareholders other than the corporation itself.C.

Par Value

- Arbitrary monetary value assigned to shares of stock and is printed on thestock certificate.D.

No-Par Stock

- Stock issued without a par value.E.

Legal Capital

- The minimum contribution by shareholders that must remain in thecorporation to protect creditors.F.

Common Stock

- When a corporation has only one class of stock, it is called CommonStock.G.

Preferred Stock

- Class of stock which has preferential rights.(1) Preferential dividend distribution(2) Preferential liquidation rights

Types of Preferred Stock

:(1) Participating Preferred(2) Nonparticipating Preferred(3) Cumulative Preferred(4) Noncumulative PreferredH.

Treasury Stock

- Previously issued stock that is repurchased by the issuing corporation.

Dividends

- Distribution of earnings to shareholders.(1) Cash(2) Property(3) Stock J.

Stock Splits

- Reduction of par value of common stock and the issuance of a proportionate number of additional shares.III.

STOCK ISSUANCE

1. Issue common stock for cash.A. Issuance at par valueDR CashCR Common Stock (# shares issued X par value per share)B. Issuance above par valueDR Cash (Proceeds)CR Common Stock (Total Par Value)CR Additional Paid-In Capital (Proceeds - Total Par Value)(1) Common Stock - Stockholders' Equity Account(2) Additional Paid-In Capital - Stockholders' Equity AccountC. Issue No-par Common Stock DR Cash (Proceeds)CR Common Stock (Stated Value X #Shares Issued)2. Issue Preferred Stock Same as above

EXCEPT

use Preferred Stock Account.IV.

TREASURY STOCK

Classified as treasury stock only if it meets the following conditions:1. Stock issued as fully paid;2. Stock later was reacquired by the corporation;3. Stock has not been canceled or reissued.

Purchase of Treasury Stock

Viewed as a return of capital to the shareholders from whom the purchase was made.Thus, it is a temporary reduction of stockholders' equity.DR Treasury Stock (Cost)CR Cash (Cost)(# Shares purchased X Cost per share)(1) Treasury Stock - Contra Stockholders' Equity Account. Normal Debit Balance.Presented between Retained Earnings and Total Stockholders' Equity2.

Resale of Treasury Stock

A. Use Cost MethodDR Cash (Proceeds)DR/CR APIC - Treasury Stock (Difference between proceeds and originalcost)CR Treasury Stock (Original Cost)V.

DIVIDENDS

Dividend Declaration

Formal action by Board of Directors which authorizes the distribution of earnings toshareholders.2.

Important Dates

A. Declaration DateDate on which the corporation announces its intention to pay a dividend on capital stock.B. Date of RecordDate on which a stockholder must own one or more shares of stock in order to receive adividend.C. Date of PaymentDate on which a dividend is actually paid.