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					                       CHAPTER            15

                 STOCKHOLDERS’ EQUITY



             Intermediate Accounting
                   13th Edition
          Kieso, Weygandt, and Warfield

Chapter
 15-1
                      Corporate Capital

      Sale of Treasury Stock

              Above Cost
              Below Cost

          Both increase total assets and stockholders’
          equity.




Chapter
 15-2                            LO 4 Describe the accounting for treasury stock.
                      Corporate Capital

   Illustration: Pacific acquired 10,000 shares of its
   treasury stock at $11 per share. It now sells 1,000
   shares at $15 per share on March 10. Pacific records
   the entry as follows.

          Cash                           15,000
            Treasury stock                                    11,000
            Paid-in capital from treasury stock                4,000




Chapter
 15-3                             LO 4 Describe the accounting for treasury stock.
                     Corporate Capital

   Illustration: If Pacific sells an additional 1,000 shares
   of treasury stock on March 21 at $8 per share, it
   records the sale as follows.

      Cash                                           8,000
      Paid-in capital from treasury stock            3,000
          Treasury stock                                           11,000




Chapter
 15-4                            LO 4 Describe the accounting for treasury stock.
                              Corporate Capital

          Illustration 15-6




   Illustration: Assume that Pacific sells an additional
   1,000 shares at $8 per share on April 10.

      Cash                                                8,000
      Paid-in capital from treasury stock                 1,000
      Retained earnings                                   2,000
          Treasury stock                                                11,000
Chapter
 15-5                                 LO 4 Describe the accounting for treasury stock.
                   Corporate Capital

      Retiring Treasury Stock

           This decision results in cancellation of the
              treasury stock and a reduction in the number
              of shares of issued stock.




Chapter
 15-6                          LO 4 Describe the accounting for treasury stock.
                            Preferred Stock

      Features often associated with preferred stock.

          1.   Preference as to dividends.
          2.   Preference as to assets in liquidation.
          3.   Convertible into common stock.
          4.   Callable at the option of the corporation.
          5.   Nonvoting.




Chapter
 15-7                       LO 5 Explain the accounting for and reporting of preferred stock.
                       Preferred Stock

      Features of Preferred Stock
           Cumulative
           Participating
           Convertible
           Callable
           Redeemable

           Accounting for preferred stock at issuance is
           similar to that for common stock.
Chapter
 15-8                   LO 5 Explain the accounting for and reporting of preferred stock.
                       Preferred Stock

   Illustration: Bishop Co. issues 10,000 shares of $10 par
   value preferred stock for $12 cash per share. Bishop
   records the issuance as follows:

      Cash                                               120,000
          Preferred stock                                               100,000
          Paid-in capital in excess of par                                20,000




Chapter
 15-9                   LO 5 Explain the accounting for and reporting of preferred stock.
                       Dividend Policy

     Dividend distributions generally are based on
     accumulated profits (retained earnings).

     Few companies pay dividends in amounts equal to
     their legally available retained earnings. Why?
           Maintain agreements with creditors.
           Meet state incorporation requirements.
           To finance growth or expansion.
           To smooth out dividend payments.
           To build up a cushion against possible losses.

Chapter
 15-10                       LO 6 Describe the policies used in distributing dividends.
                      Types of Dividends

     1. Cash dividends.                  3. Liquidating dividends.
     2. Property dividends.              4. Stock dividends.

     Dividends require information concerning three dates:
          a. Date of declaration
          b. Date of record
          c. Date of payment



Chapter
 15-11                         LO 7 Identify the various forms of dividend distributions.
                    Types of Dividends

      Cash Dividends
          Board of directors vote on the declaration of
          cash dividends.

          A declared cash dividend is a liability.

          Companies do not declare or pay cash dividends
          on treasury stock.




Chapter
 15-12                      LO 7 Identify the various forms of dividend distributions.
                         Cash Dividend
      Illustration: What would be the journal entries made by
      a corporation that declared a $50,000 cash dividend on
      March 10, payable on April 6 to shareholders of record on
      March 25?
                                                    Debit             Credit
      March 10 (Declaration Date)
          Retained earnings                         50,000
            Dividends payable                                         50,000

      March 25 (Date of Record)                          No entry

      April 6 (Payment Date)
          Dividends payable                         50,000
             Cash                                                     50,000
Chapter
 15-13                          LO 7 Identify the various forms of dividend distributions.
                    Types of Dividends

      Property Dividends
          Dividends payable in assets other than cash.

          Restate at fair value the property it will
          distribute, recognizing any gain or loss.




Chapter
 15-14                      LO 7 Identify the various forms of dividend distributions.
                       Property Dividend
      Illustration: A dividend is declared Jan. 5th and paid
      Jan. 25th, in bonds held as an investment; the bonds have
      a book value of $100,000 and a fair market value of
      $135,000.
                                                  Debit             Credit
      Date of Declaration
          Investment in bonds                     35,000
             Gain on investment                                     35,000
                                      and
          Retained earnings                      135,000
            Property dividend payable                              135,000
      Date of Issuance
          Property dividend payable              135,000
             Investment in bonds                                   135,000
Chapter
 15-15                        LO 7 Identify the various forms of dividend distributions.

				
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