ACC 231 Lecture Notes - Lecture 23: Net Income, Treasury Stock, Cash Flow

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9 May 2018

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ACC 231

Lecture 23

Exam Review

Chapter 10 – Stockholder’s Equity

What does Stockholder’s Equity represent in the Accounting Equation?

How much have owners invested in the company (common stock, preferred stock, paid in

capital-common, paid in capital-preferred)

Stockholder’s Equity-3 sections

1. Paid in Capital – amount owners have invested

2. Retained Earnings – amount of earnings the corporation as kept in the company (retained)

less any dividends that we paid out. What accounts increase/decrease Retained Earnings?

Increase: net income

Decrease: dividends

3. Treasury Stock – Corporations stock that the company has repurchased on the secondary

market

Contra-Stockholders’ Equity, Debit balance, reduces stockholders’ equity

Advantages and disadvantages of a corporation

Advantages: transfer of ownership & limited liability

Disadvantages: double taxation, more difficult to set up/regulations

What are authorized vs issued vs outstanding shares?

Authorized: # of shares board has approved can be sold

Issued: # of shares sold

Outstanding Shares: number of shares currently in shareholders hands

What is the difference between Common Stock and Preferred Stock?

Common stock: usually voting rights when big decisions are being made

Preferred stock: preference when it comes to paying dividends

Record the sale of Stock for stock with and without Par Value

Par Stock

Sell 1,000 shares for $20 par value $0.50

DR Cash $20,000

CR Common Stock $500

CR Paid in Capital – Common $19,500

No Par Stock

DR Cash $20,000

CR Common Stock $20,000

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Document Summary

How much have owners invested in the company (common stock, preferred stock, paid in capital-common, paid in capital-preferred) Stockholder"s equity-3 sections: paid in capital amount owners have invested, retained earnings amount of earnings the corporation as kept in the company (retained) less any dividends that we paid out. Decrease: dividends: treasury stock corporations stock that the company has repurchased on the secondary market. Disadvantages: double taxation, more difficult to set up/regulations. Authorized: # of shares board has approved can be sold. Outstanding shares: number of shares currently in shareholders hands. Common stock: usually voting rights when big decisions are being made. Preferred stock: preference when it comes to paying dividends. Record the sale of stock for stock with and without par value. Sell 1,000 shares for par value sh. 50. Record the payment of cash dividends (j/e at date of declaration vs date of record vs date of.

Related Questions

Diamondback Welding & Fabrication Corporation sells and services pipe welding equipment in Illinois. The following selected accounts appear in the ledger of Diamondback Welding & Fabrication at the beginning of the current year:

Preferred 2% Stock, $80 par (100,000 shares authorized, 60,000 shares issued)	$4,800,000
Paid-In Capital in Excess of ParâPreferred Stock	210,000
Common Stock, $9 par (3,000,000 shares authorized, 1,750,000 shares issued)	15,750,000
Paid-In Capital in Excess of ParâCommon Stock	1,400,000
Retained Earnings	52,840,000

During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows:

a. Purchased 87,500 shares of treasury common for $8 per share.

b. Sold 55,000 shares of treasury common for $11 per share.

c. Issued 20,000 shares of preferred 2% stock at $84.

d. Issued 400,000 shares of common stock at $13, receiving cash.

e. Sold 18,000 shares of treasury common for $7.50 per share.

f. Declared cash dividends of $1.60 per share on preferred stock and $0.05 per share on common stock.

g. Paid the cash dividends.

Required:

Journalize the entries to record the transactions.

For a compound transaction, if an amount box does not require an entry, leave it blank.

aquamarinewombat277

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

lilachorse885

The following selected accounts appear in the ledger of EJConstruction Inc. at the beginning of the current fiscal year:

Preferred 1% Stock, $50 par (100,000 shares authorized, 79,600shares issued)	$3,980,000
Paid-In Capital in Excess of ParâPreferred Stock	159,200
Common Stock, $3 par (5,000,000 shares authorized, 1,870,000shares issued)	5,610,000
Paid-In Capital in Excess of ParâCommon Stock	1,215,500
Retained Earnings	31,497,000

During the year, the corporation completed a number oftransactions affecting the stockholdersâ equity

The owners' equity in a corporation.

. They are summarized as follows:

Jan.	5	Issued 532,900 shares of common stock The stock outstanding when a corporation has issued only oneclass of stock. at $9, receiving cash.
Feb.	10	Issued 11,000 shares of preferred 1% stock at $58.
Mar.	19	Purchased 45,400 shares of treasury common for $8 pershare.
May	16	Sold 21,400 shares of treasury common for $10 per share.
Aug.	25	Sold 4,300 shares of treasury common for $7 per share.
Dec.	6	Declared cash dividends of $0.50 per share on preferred stockand $0.07 per share on common stock.
	31	Paid the cash dividends.

Journalize the entries to record the transactions. Refer to theChart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

EJ Construction Inc.

General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
151	Prepaid Insurance
181	Land
193	Equipment
194	Accumulated Depreciation-Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
226	Interest Payable
231	Cash Dividends Payable
236	Stock Dividends Distributable
241	Salaries Payable
261	Mortgage Note Payable