Authorization and Issuance Of capital stock Authorized Shares The maximum number of shares Of capital stock that can be sold to the public
Authorized Shares Issued Shares are authorized shares of stock that have been sold Unissued sharesare authorized shares of stock that never have been sold. Usually shares are sold through an underwriter.
Authorized Shares Outstanding Shares are Issued shares that are Owned by stockholders Outstanding Shares Issued Shares Unissued Shares Treasury Shares Treasury Shares- are issued shares that have been reacquired by the corporation.
Common Stock Common Stock can be issued in three forms Par Value No Par Stated Value Common Stock Common Stock Common Stock We will look at All proceeds credited Treated like this form to common stock Par Value Common Stock
Preferred Stock Separate class of stock, typically having priority over common shares in: Dividend distributions Distribution of Assets in case of liquidation Other features include: Cumulative Usually callable by Normally has no Dividend rights the company voting rights
Preferred Stock (Other Features) Cumulative Dividends in arrears must be paid before dividends may be paid on commons stock vs Noncumulative Undeclared dividends from current and prior years do not have to be paid in future years.
Treasury Stock Treasury shares are issued shares that have been reacquired by the corporation. No voting or dividend rights Contra Equity Account When stock is reacquired, the corporation records the treasury stock at cost.
Basic Stock Journal Entries and The Stockholders Equity Section Steve Williams and several friends organized a corporation called Williams Holding, Inc. The corporation was authorized to issue 50,000 shares of $100 par value 10 percent cumulative preferred stock and 400,000 shares of $2 par value common stock. The following transactions (among others) occurred during the year. Jan 6. Jan 7. Jan 12 Issued for cash 20,000 shares of common stock @ $14 per share. The shows were issued to William and 10 other investor. Issued an additional 500 shares of common stock to Williams in exchange for his service in organizing the corporation. The stockholders agreed that these services were worth $7,000. Issued 2,500 shares of preferred stock for $120 per share. Jan 14. Acquired land as a building site in exchange for 15,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $15 per share. Nov 15. The first annual dividend of $.50 per share was declared on common stock and preferred stock will receive the normal
dividend payout,with no dividends in arrears, to be paid December 20. Dec 20. Paid the cash dividend declared on November 15 Dec 21 The Corporation decided to repurchase 100 shares at $17 per share. This was done to try to increase the value of the Stock. Dec 29. Dec 31. The Corporation then sold 50 shares of the 100 shares repurchased on Dec 21 for $20 per share. After the revenue and expenses were closed into the income summary account, that account indicated a net income of $147,200.
Dividend Calculation Commons Stock (.25 x 35,500 shares) $8,875 (20,000 + 500 + 15,000 = 35,000 Preferred Stock (2,500 x 10% x 100 par) $251,000 Total dividends $33,875
General Journal Date Debit Credit 6-Jan Cash 280,000 Common Stock 40,000 Additional PIC -common 240,000 Issued 20,000 shares of $2 par stock at 14 per share 7 Organization Cost Exp. 7,000 Common Stock 1,000 Additional PIC - common 6,000 Issud 500 shares of $2 par (7,000/500 =$14) 12 Cash 300,000 Preferred Stock 250,000 Pic - Preferred Stock 50,000 Issued 2,500 shares at $120 per share, Preferred Stock par value is $100 14 Land 225,000
Common Stock 30,000 Additonal PIC 195,000 Issued 15,000 shares of $2 par common stock for land value at $225,000 (15,000 * 15) 15-Nov Dividends 33,875 Dividends payable 33,875 To record dividends declared 20-Dec dividends payable 33,875 Cash 33,875 Payment of dividends declared on Nov 15 21-Dec Treasury stock 1,700 Cash 1,700 Purchased 100 shares at $17 29-Dec Cash 1,000 Treasury Stock 850 APIC - Treasury Stock 150 Cost $17 & sold for $20 reissued the treasury stock 31 Income Summary 147,200 Retained Earnings 147,200
To close the income summary account for the year 31 Retained Earnings 33,875 Dividends 33,875 To close the dividends acct.
Steve Williams Holdings, Inc Retained Earnings Statement 31-Dec-08 Retained Earnings, Jan 1, 2008 - Add: Net Income 147,200 Less: Dividends (33,875) Retained Earnings, Decemeber 31, 2008 181,075
Steve Williams Holdings, Inc Partial Balance Sheet 31-Dec-08 Stockholders' equity 10% cumulative preferred stock, $100 par, authorized 50,000 shares, 2,500 issued and outstanding shares 250,000 Common stock, $2 par, authorized 400,000 shares issued and 70,900 outstanding 35,450 shares Additional -Paid-In-Capital Preferred Stock 50,000 Common Stock 391,000 Treasury Stock 150 Total paid-in-capital 762,050 Retained Earnings 181,075 Less: Treasury Stock ( 50 shares) (850) Total Stockholders' Equity 942,275