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Module 5 Part 2 The Corporation (Components) (Autosaved)
Module 5 Part 2 The Corporation (Components) (Autosaved)
THE
C O R P O R AT E B U S I N E S S
COMPONENTS OF A
CORPORATION
MAJOR COMPONENTS OF
SHAREHOLDERS’ EQUITY SECTION
Two major components:
A. SHARE CAPITAL reflects the amount of resources
received by the corporation as a result of investment by
stockholders, donation and or other capital stock
transactions.
B. RETAINED EARNINGS is the amount of capital
accumulated and retained through the profitable
operations of the business.**
❑ Land 1,000,000
Ordinary Shares 900,000
Share Premium-Ordinary 100,000
To record issuance of shares for non cash consideration.
TWO METHODS OF ACCOUNTING
FOR CAPITAL STOCK
JOURNAL ENTRY METHOD MEMORANDUM METHOD
HIGHEST BIDDER
➢ is a person who is willing to pay the full amount of the “offer price”
plus accrued interest, cost of ads and other expenses related to
auction sale in exchange for the smallest number of shares.
ILLUSTRATION
Assuming Medina Co., a subscriber, failed to settle part of his
subscriptions in the amount of P48,000. After complying with legal
procedures pertaining to delinquency sale, a public auction was held.
The offer price is P59,000 including accrued interest of 3,000 and
P8,000 expenses of sale.
The bidders for the shares were the following:
Example Corporation
Statement of Financial Position
August 31, 2014
ASSETS SHAREHOLDERS’ EQUITY
Retained Earnings 0
Organizational Expense (15,000)
Deficit (15,000)