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1、Chapter 15-1Chapter 15-2Intermediate Accounting13th EditionKieso, Weygandt, and Warfield Chapter 15-3Chapter 15-4Chapter 15-5Three primary forms of business organizationLO 1 Discuss the characteristics of the corporate form of organization.Special characteristics of the corporate form:1.Influence of
2、 state corporate law.2.Use of capital stock or share system.3.Development of a variety of ownership interests.Chapter 15-6State Corporate LawLO 1 Discuss the characteristics of the corporate form of organization.Corporation must submit articles of incorporation to the state in which incorporation is
3、 desired.General Motors - incorporated in Delaware.U.S. Steel - incorporated in New Jersey.Accounting for stockholders equity follows the provisions of each states business incorporation act.Chapter 15-7Capital Stock or Share SystemLO 1 Discuss the characteristics of the corporate form of organizati
4、on.In the absence of restrictive provisions, each share carries the following rights:1.To share proportionately in profits and losses.2.To share proportionately in management (the right to vote for directors).3.To share proportionately in assets upon liquidation.4.To share proportionately in any new
5、 issues of stock of the same classcalled the preemptive right.Chapter 15-8Variety of Ownership InterestsLO 1 Discuss the characteristics of the corporate form of organization.Common stock represents basic ownership interest.Bears ultimate risks of loss.Receives the benefits of success.Not guaranteed
6、 dividends nor assets upon dissolution.Preferred stock is created by contract, when stockholders sacrifice certain rights in return for other rights or privileges, usually dividend preference. Chapter 15-9AccountTwo Primary Sources of EquityLO 2 Identify the key components of stockholders equity.Cha
7、pter 15-10Issuance of StockAccounting problems: 1.Par value stock.2.No-par stock.3.Stock issued with other securities.4.Stock issued in noncash transactions.5.Costs of issuing stock.LO 3 Explain the accounting procedures for issuing shares of stock.Shares authorized - Shares sold - Shares issuedChap
8、ter 15-11Par Value StockLow par values help companies avoid a contingent liability. Corporations maintain accounts for:Preferred Stock or Common Stock.Additional Paid-in CapitalLO 3 Explain the accounting procedures for issuing shares of stock.Chapter 15-12LO 3 Explain the accounting procedures for
9、issuing shares of stock.Chapter 15-13No-Par StockReasons for issuance:Avoids contingent liability.Avoids confusion over recording par value versus fair market value.LO 3 Explain the accounting procedures for issuing shares of stock.Some states require that no-par stock have a stated value. Chapter 1
10、5-14LO 3 Explain the accounting procedures for issuing shares of stock.Chapter 15-15Stock Issued with Other SecuritiesTwo methods of allocating proceeds:1.the proportional method and2.the incremental method.LO 3 Explain the accounting procedures for issuing shares of stock.Chapter 15-16LO 3 Explain
11、the accounting procedures for issuing shares of stock.Proportional MethodChapter 15-17LO 3 Explain the accounting procedures for issuing shares of stock.Chapter 15-18LO 3 Explain the accounting procedures for issuing shares of stock.Incremental MethodChapter 15-19LO 3 Explain the accounting procedur
12、es for issuing shares of stock.Chapter 15-20Stock Issued in Noncash TransactionsThe general rule: Companies should record stock issued for services or property other than cash at either the: fair value of the stock issued or fair value of the noncash consideration received, whichever is more clearly
13、 determinable.LO 3 Explain the accounting procedures for issuing shares of stock.Chapter 15-21LO 3 Explain the accounting procedures for issuing shares of stock.Chapter 15-22LO 3 Explain the accounting procedures for issuing shares of stock.Chapter 15-23Costs of Issuing StockDirect costs incurred to
14、 sell stock, such as underwriting costs, accounting and legal fees, printing costs, andtaxes, should be reported as a reduction of the amounts paid in (additional paid-in capital).LO 3 Explain the accounting procedures for issuing shares of stock.Chapter 15-24Reacquisition of SharesLO 4 Describe the
15、 accounting for treasury stock.Corporations purchase their outstanding stock:To provide tax-efficient distributions of excess cash to shareholders.To increase earnings per share and return on equity.To provide stock for employee stock compensation contracts or to meet potential merger needs.To thwar
16、t takeover attempts or to reduce the number of stockholders.To make a market in the stock.Chapter 15-25Purchase of Treasury StockTwo acceptable methods: Cost method (more widely used). Par or Stated value method. Treasury stock, reduces stockholders equity.LO 4 Describe the accounting for treasury s
17、tock.Chapter 15-26LO 4 Describe the accounting for treasury stock.Illustration 15-4Chapter 15-27LO 4 Describe the accounting for treasury stock.Chapter 15-28LO 4 Describe the accounting for treasury stock.Illustration 15-5Chapter 15-29Sale of Treasury StockAbove Cost Below CostBoth increase total as
18、sets and stockholders equity. LO 4 Describe the accounting for treasury stock.Chapter 15-30LO 4 Describe the accounting for treasury stock.Chapter 15-31LO 4 Describe the accounting for treasury stock.Chapter 15-32LO 4 Describe the accounting for treasury stock.Illustration 15-6Chapter 15-33Retiring
19、Treasury StockThis decision results in cancellation of the treasury stock and a reduction in the number of shares of issued stock.LO 4 Describe the accounting for treasury stock.Chapter 15-34Features often associated with preferred stock.1.Preference as to dividends.2.Preference as to assets in liqu
20、idation.3.Convertible into common stock.4.Callable at the option of the corporation.5.Nonvoting.LO 5 Explain the accounting for and reporting of preferred stock.Chapter 15-35CumulativeParticipatingConvertibleCallableRedeemableLO 5 Explain the accounting for and reporting of preferred stock.Features
21、of Preferred StockA corporation may attach whatever preferences or restrictions, as long as it does not violate its state incorporation law.Accounting for preferred stock at issuance is similar to that for common stock.Chapter 15-36LO 5 Explain the accounting for and reporting of preferred stock.Cha
22、pter 15-37LO 6 Describe the policies used in distributing dividends.Chapter 15-381.Cash dividends.2.Property dividends.LO 7 Identify the various forms of dividend distributions.Dividends require information concerning three dates:a. Date of declarationb. Date of recordc. Date of payment3.Liquidating
23、 dividends.4.Stock dividends.Chapter 15-39LO 7 Identify the various forms of dividend distributions.Chapter 15-40March 10 (Declaration Date)Retained earnings50,000Dividends payable50,000March 25 (Date of Record) April 6 (Payment Date)Dividends payable50,000Cash50,000DebitCreditLO 7 Identify the vari
24、ous forms of dividend distributions.No entryChapter 15-41LO 7 Identify the various forms of dividend distributions.Chapter 15-42Date of DeclarationInvestment in bonds35,000Gain on investment35,000andDate of IssuanceProperty dividend payable135,000Investment in bonds135,000DebitCreditRetained earning
25、s135,000Property dividend payable135,000LO 7 Identify the various forms of dividend distributions.Chapter 15-43LO 7 Identify the various forms of dividend distributions.Chapter 15-44June 1 (Payment Date)April 20 (Declaration Date)Retained earnings375,000Additional paid-in capital125,000DebitCreditDi
26、vidends payable500,000Dividends payable 500,000Cash500,000LO 7 Identify the various forms of dividend distributions.Chapter 15-45LO 8 Explain the accounting for small and large stock dividends, and for stock splits.Chapter 15-4610% stock dividend is declaredRetained earnings20,000Common stock divide
27、nd distributable500DebitCreditAdditional paid-in capital19,500Stock issuedCommon stock div. distributable 500Common stock500LO 8 Explain the accounting for small and large stock dividends, and for stock splits.Chapter 15-47LO 8 Explain the accounting for small and large stock dividends, and for stoc
28、k splits.Chapter 15-482 for 1 Stock SplitLO 8 Explain the accounting for small and large stock dividends, and for stock splits.Chapter 15-49LO 8 Explain the accounting for small and large stock dividends, and for stock splits.Chapter 15-5050% stock dividend is declaredRetained earnings2,500Common st
29、ock dividend distributable2,500DebitCreditStock issuedCommon stock dividend distributable 2,500Common stock2,500LO 8 Explain the accounting for small and large stock dividends, and for stock splits.Chapter 15-51LO 9 Indicate how to present and analyze stockholders equity.PresentationBalance SheetIll
30、ustration 15-13Chapter 15-52LO 9 Indicate how to present and analyze stockholders equity.Presentation Statement of Stockholders EquityIllustration 15-14Chapter 15-53Ratio shows how many dollars of net income the company earned for each dollar invested by the owners.AnalysisNet income Preferred divid
31、endsAverage common stockholders equity Rate of Return on Common Stock Equity =LO 9 Indicate how to present and analyze stockholders equity.Chapter 15-54LO 9 Indicate how to present and analyze stockholders equity.Illustration: Gerbers Inc. had net income of $360,000, declared and paid preferred divi
32、dends of $54,000, and average common stockholders equity of $2,550,000Illustration 15-15Chapter 15-55It is important to some investors that the payout be sufficiently high to provide a good yield on the stock.AnalysisCash dividendsPayout Ratio =LO 9 Indicate how to present and analyze stockholders e
33、quity.Net income Preferred dividendsChapter 15-56LO 9 Indicate how to present and analyze stockholders equity.Illustration: Troy Co. has cash dividends of $100,000 and net income of $500,000, and no preferred stock outstanding.Illustration 15-16Chapter 15-57The amount each share would receive if the
34、 company were liquidated on the basis of amounts reported on the balance sheet.AnalysisCommon stockholders equityBook Value Per Share =LO 9 Indicate how to present and analyze stockholders equity.Outstanding sharesChapter 15-58LO 9 Indicate how to present and analyze stockholders equity.Illustration
35、: Chen Corporations common stockholders equity is $1,000,000 and it has 100,000 shares of common stock outstanding.Illustration 15-17Chapter 15-59Many countries have different investor groups than the United States. For example, in Germany, financial institutions like banks are not only the major cr
36、editors but often are the largest stockholders as well.The accounting for treasury stock retirements differs between iGAAP and U.S. GAAP.A major difference between iGAAP and U.S. GAAP relates to the account Revaluation Surplus. Revaluation surplus arises under iGAAP because companies are permitted t
37、o revalue their property, plant, and equipment to fair value under certain circumstances.Chapter 15-60Both iGAAP and U.S. GAAP consider the statement of stockholders equity a primary financial statement. However, under iGAAP a company has the option of preparing a statement of stockholders equity si
38、milar to U.S. GAAP or preparing a statement of recognized income and expense (SoRIE). The SoRIE reports the items that were charged directly to equity such as revaluation surplus and then adds the net income for the period to arrive at total recognized income and expense. In this situation, addition
39、al note disclosure is required to provide reconciliations of other equity items.Chapter 15-61LO 10 Explain the different types of preferred stock dividends and their effect on book value per share.Illustration: Assume that in 2010, Mason Company is to distribute $50,000 as cash dividends, its outsta
40、nding common stock has a par value of $400,000, and its 6 percent preferred stock has a par value of $100,000. 1. If the preferred stock is noncumulative and nonparticipating:Illustration 15A-1Chapter 15-62LO 10 Explain the different types of preferred stock dividends and their effect on book value
41、per share.Illustration: Assume that in 2010, Mason Company is to distribute $50,000 as cash dividends, its outstanding common stock has a par value of $400,000, and its 6 percent preferred stock has a par value of $100,000. 2. If the preferred stock is cumulative and nonparticipating, and Mason Comp
42、any did not pay dividends on the preferred stock in the preceding two years:Illustration 15A-2Chapter 15-63LO 10 Explain the different types of preferred stock dividends and their effect on book value per share.3. If the preferred stock is noncumulative and is fully participating:Illustration 15A-3C
43、hapter 15-64LO 10 Explain the different types of preferred stock dividends and their effect on book value per share.Illustration: Assume that in 2010, Mason Company is to distribute $50,000 as cash dividends, its outstanding common stock has a par value of $400,000, and its 6 percent preferred stock
44、 has a par value of $100,000. Illustration 15A-44.If the preferred stock is cumulative and is fully participating, and Mason Company did not pay dividends on the preferred stock in the preceding two years:Chapter 15-65LO 10 Explain the different types of preferred stock dividends and their effect on
45、 book value per share.Book value per share is computed as net assets divided by outstanding shares at the end of the year. The computation becomes more complicated if a company has preferred stock.Illustration 15A-5Chapter 15-66LO 10 Explain the different types of preferred stock dividends and their
46、 effect on book value per share.Assume that the same facts exist except that the 5 percent preferred is cumulative, participating up to 8 percent, and that dividends for three years before the current year are in arrears.Illustration 15A-6Chapter 15-67Copyright 2009 John Wiley & Sons, Inc. All right
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