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Lecture Financial accounting (3/e): Chapter 10 - Spiceland, Thomas, Herrmann

Chapter 10 - Stockholders ’equity. After studying this chapter you will be able to understand: Identify the advantages and disadvantages of the corporate form of ownership, record the issuance of common stock, contrast preferred stock with common stock and bonds payable, account for treasury stock, describe retained earnings and record cash dividends, | Stockholders’ Equity Chapter 10 1 Learning Objectives Identify the advantages and disadvantages of the corporate form of ownership Record the issuance of common stock Contrast preferred stock with common stock and bonds payable Account for treasury stock Describe retained earnings and record cash dividends 10-2 Learning Objectives Explain the effect of stock dividends and stock splits Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of stockholders’ equity Evaluate company performance using information on stockholders’ equity 10-3 Part A Invested Capital 10-4 In this section, we discuss transactions involving paid-in capital. A better description might be “invested capital” since it’s the amount stockholders invest when they purchase a company’s stock. Invested capital is the amount of money paid into a company by its owners. To better understand the composition of invested capital, it is helpful to know more about the corporate form of ownership. 4 Learning Objective 1 Identify the advantages and disadvantages of the corporate form of ownership 10-5 Corporations Articles of incorporation: corporate charter describing: Nature of business activities Shares of stock to be issued Initial board of directors The board of directors establish corporate policies and appoints officers who manage the corporation 10-6 Corporations are formed in accordance with the laws of individual states. The state incorporation laws guide corporations as they write their articles of incorporation (sometimes called the corporate charter). The articles of incorporation describe (a) the nature of the firm’s business activities, (b) the shares of stock to be issued, and (c) the initial board of directors. The board of directors establishes corporate policies and appoints officers who manage the corporation. 6 Stages of Equity Financing Corporations first raise money from founders of the business, friends, and family To grow, companies seek investments . | Stockholders’ Equity Chapter 10 1 Learning Objectives Identify the advantages and disadvantages of the corporate form of ownership Record the issuance of common stock Contrast preferred stock with common stock and bonds payable Account for treasury stock Describe retained earnings and record cash dividends 10-2 Learning Objectives Explain the effect of stock dividends and stock splits Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of stockholders’ equity Evaluate company performance using information on stockholders’ equity 10-3 Part A Invested Capital 10-4 In this section, we discuss transactions involving paid-in capital. A better description might be “invested capital” since it’s the amount stockholders invest when they purchase a company’s stock. Invested capital is the amount of money paid into a company by its owners. To better understand the composition of invested capital, it is helpful to know more about the corporate form of .