Kế toán, kiểm toán - Chapter 20: Corporations: formation and capital stock transactions

1-*McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Corporations: Formation and CapitalStock Transactions Section 1: Forming a CorporationChapter20Section ObjectivesExplain the characteristics of a corporation.Describe special “hybrid” organizations that have some characteristics of partnerships and some characteristics of corporations. Created by corporate charter issued by a state government. Can enter into contracts and own property. Can have few or many owners. Can be privately held or publicly held. Has shareholders who own the shares of stock. They are the owners of the corporation. Explain the characteristics ofa corporationObjective 1AdvantagesDisadvantagesEase of raising capitalLimited liabilityRestricted agencyContinuous existenceTransferability of ownership rights Corporate income taxGovernmental regulationCorporations Subchapter S corporation. Limited liability partnerships (LLP). Limited liability companies (LLCs).“Hybrid” Business EntitiesHybrid entities have characteristics of partnerships and corporations. Describe special “hybrid” organizationsObjective 2After a Corporate Charter Is IssuedShareholders elect permanent directors.Directors or shareholders approve bylaws.Board selects corporate officers.Shares are issued to individuals who have paid full purchase price of the stock.Organizers elect an acting board of directors.Officers hire employees and begin operations.Corporations: Formation and CapitalStock Transactions Section 2: Types of Capital StockChapter20Section ObjectivesDescribe the different types of stock.Compute the number of shares of common stock to be issued on the conversion of convertible preferred stock.5. Compute dividends payable on stock.Capital Stock Authorized shares: The number of shares that can be sold. Issued shares: The number of shares that have been sold. Outstanding shares: The number of shares still in circulation. Outstanding stock = Issued stock – Treasury stockThe price per share at which stock is bought and sold.Specified in the corporate charter and assigned to each share of stock for accounting purposes.A value assigned to no-par stock by the board of directors for accounting and legal purposes. Par Value Stated Value Market ValueCapital Stock ValuesCommonPreferred Stock ClassesIf there is only one class of stock, common stock is issued. Each share carries the same rights and privileges as every other share.Preferred stock has special claims on a corporation’s profits or, in case of liquidation, corporate assets. Describe the different types of stockObjective 3Dividends are distributions of the profits of a corporation to its shareholders.ANSWER:QUESTION:What are dividends?The board of directors declares dividends. Compute dividends payable on stockObjective 5Dividend Rights on Preferred Stock Cumulative preferred stock Noncumulative preferred stock Nonparticipating preferred stock Participating preferred stockCapital Stock on the Balance Sheet Capital stock represents the equity in a corporation.Common stock and preferred stock are reported separately.Since the owners of a corporation are stockholders, the equity section of the balance sheet is titled “Stockholders’ Equity.” Corporations: Formation and CapitalStock Transactions Section 3: Recording Capital Stock TransactionsChapter20Section ObjectivesRecord the issuance of capital stock at par value.Prepare a balance sheet for a corporation. Record organization costs.9. Record stock issued at a premium, and stock with no par value. 10. Record transactions for stock subscriptions.11. Describe the capital stock records for a corporation. Cash Noncash assets Services renderedRecording the Issuance of Stock Stock is issued after the purchaser has paid for it in full with one of the following:Record the issuance of capital stock at par valueObjective 6Preparing a Balance Sheet for a CorporationObjective 7When stock is issued for more than its par value, it is issued at a premium.Premiums on stock are usually credited to an account titled Paid-in Capital in Excess of Par Value.Separate accounts are set up for different classes of stock.2014Mar. 2Cash 42,000.00Preferred Stock 40,000.00Paid-in Capital in Excess of Par Value—Preferred Stock 2,000.00Issuance of 400 sharesfor $105 per share Record stock issued at a premium and stock with no par valueObjective 9Recording Rules for Par and No-Par StockPar-Value Stock No-Par-Value Stock Stated Value No Stated Value Par value is specified in corporate charter. Stock certificate indicates par value. Stated value is assigned by directors. Corporate charter indicates that stock is no-par-value stock.Stock certificate does not generally show stated value. Corporate charter indicates that stock is no-par-value stock.Stock certificate shows that stock is no-par-value stock. Recording Rules for Par and No-Par Stock (cont.)Par-Value Stock No-Par-Value Stock Stated Value No Stated Value Change in par value requires revision of charter. On issue of stock, par value is credited to capital stock account. Stated value can be changed by directors. On issue of stock, stated value is credited to capital stock account. On issue of stock, entire proceeds are credited to capital stock account. Subscriptions for Capital StockStockholder signs a subscription contract. (It details stock price and payment plan.)Stockholder pays for stock at a later date.Stockholder receives stock when payment is made. Record transactions for stock subscriptionsObjective 10Special Corporation Records and AgentsCorporations keep detailed records of stockholders’ equity and special corporate records such as: Meeting minutes Corporate bylaws Stock certificate books Stock ledgers Stock transfer records Describe the capital stock records for a corporationObjective 11