Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Investors from the general public purchase stock of publicly held corporations. A corporation distributes a portion of its earnings to stockholders in the form of dividends. Corporate financial statements report stock issues and dividends. Glencoe AccountingCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Describe the characteristics of the corporate form of business organization. Prepare journal entries of stock to investors. Prepare journal entries to record distribution of earnings to owners. Prepare financial statements for publicly held corporations. Glencoe AccountingCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Key Terms closely held corporation publicly held corporation board of directors authorized capital stock par value Publicly Held Corporations Section 21.1 common stock proxy preferred stock Paid-in Capital in Excess of Par Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Characteristics of a Corporation Publicly Held Corporations Section 21.1 A closely held corporation differs from a publicly held corporation. closely held corporation A corporation, often owned by a few people or by a family, that does not offer its stock for sale to the general public. publicly held corporation A corporation whose stock is widely held, has a large market, and is usually traded on a stock exchange. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Characteristics of a Corporation Publicly Held Corporations Section 21.1 Features of a Corporation Legal Permission to Operate Separate Legal Entity Stockholders Board of Directors board of directors A group of people, elected by the stockholders, who govern and are responsible for the affairs of a corporation. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 authorized capital stock The maximum number of shares of stock a corporation may issue. What Is Authorized Capital Stock? Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 par value The dollar amount assigned to each share of stock before it is sold to the public; used to determine the amount credited to the capital stock account. What Is Par Value? Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 Owners of Common Stock Participate in Several Ways: They elect and exercise control through the board of directors. They can use a proxy. They share in earnings of the corporation by receiving dividends. They are entitled to share in the assets of the corporation if it goes out of business. common stock The stock issued by a corporation when it issues only one class of stock. proxy A document that transfers a stockholder’s voting rights to someone else. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 preferred stock Stock whose owners have certain privileges over common stockholders. Owners of Preferred Stock Participate in These Ways: They are entitled to receive dividends before common stockholders. They are given preference over common stockholders to distribution of corporate assets if the company goes out of business. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 Preferred Stock Owners Give Up Two Rights: The right to vote The right to participate in the control of the corporation Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 Issuing Common Stock Business Transaction On January 3 The Starting Line Sports Gear issued 10,000 shares of $10 par stock at $10 par share. The Starting Line received $100,000 for the shares, Memorandum 3. See page 619 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 Paid-in-Capital in Excess of Par The account that represents the amount of cash received by a corporation over the stock’s par value. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 Business Transaction On January 4 The Starting Line issued 5,000 shares of $10 par common stock at $11.50 per share, Memorandum 147. The Starting Line received $57,500 for the shares. See page 620 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Capital Stock Publicly Held Corporations Section 21.1 Business Transaction On January 5 The Starting Line issued 250 shares of preferred $6 stock, $100 par, at $100 per share. The Starting Line received $25,000 for the shares, Memorandum 5. See page 620 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Key Term dividend Distribution of Corporate Earnings Section 21.2 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Dividend Accounts Distribution of Corporate Earnings Section 21.2 Dividends Dividends decrease retained earnings. There must be an adequate balance in the Retained Earnings account. The Dividends account is used to record dividends declared and is closed to the Retained Earnings account at the end of the period. dividend A distribution of cash to stockholders of a corporation; reduces the corporation’s retained earnings. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Dividend Transactions Distribution of Corporate Earnings Section 21.2 Business Transaction On November 15 The Starting Line’s board of directors declared an annual cash dividend on the 250 shares of preferred $6 stock issued. It is payable to preferred stockholders of record on November 29 and will be paid on December 15. The total preferred dividends amount is $1,500 (250 shares x $6), Memorandum 215. See page 624 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Dividend Transactions Distribution of Corporate Earnings Section 21.2 Business Transaction On December 15 The Starting Line issued Check 1373 for $1,500 in payment of the dividend on preferred stock declared November 15. See page 624 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Dividend Transactions Distribution of Corporate Earnings Section 21.2 Dividends on common stock can be declared in two ways: Dividends can be paid annually, semiannually, or quarterly. The board of directors may declare a dividend amount per common share. The board may decide to declare the total cash dividend for both preferred and common stock. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Key Term statement of stockholders’ equity Financial Reporting for a Publicly Held Corporation Section 21.3 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Income Statement Financial Reporting for a Publicly Held Corporation Section 21.3 The income statement of a publicly held corporation is similar to that of a closely held corporation. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Statement of Stockholders’ Equity Financial Reporting for a Publicly Held Corporation Section 21.3 Information on the Statement of Stockholders’ Equity statement of stockholders’ equity A financial statement that reports the changes that have taken place in all of the stockholders’ equity accounts during the period. the number of shares of each type of stock issued the total amount received for those shares the net income or net loss for the period dividends declared during the period Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Statement of Stockholders’ Equity Financial Reporting for a Publicly Held Corporation Section 21.3 The Statement of Stockholders’ Equity See page 627 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Balance Sheet Financial Reporting for a Publicly Held Corporation Section 21.3 Each listing in the stockholders’ equity section of the balance sheet describes the par value the number of shares authorized the number of shares issued Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Balance Sheet Financial Reporting for a Publicly Held Corporation Section 21.3 See page 628 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Statement of Cash Flows Financial Reporting for a Publicly Held Corporation Section 21.3 Stock issue results in cash inflow, and payment of dividends is a cash outflow. See page 628 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Question 1 On February 14 Excalibur Corporation issued 2,000 shares of $25 par common stock at $35 per share. List the steps to record this transaction. Identify the accounts affected. Classify the accounts affected. Determine the amount of increase or decrease for each account affected. Which account is debited? For what amount? Which account is credited? For what amount? Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Question 2 List one advantage each for holding common and preferred stock. Common stock: Answers will vary, but advantages of holding common stock include these: (a) electing the corporation’s board of directors and, through it, exercising control over its operations, (b) sharing in the earnings of the corporation by receiving dividends, and (c) receiving a share of the assets if the business ceases operations and liquidates. Preferred stock: Answers will vary, but advantages of holding preferred stock include these: (a) receiving dividends before common stockholders in a set amount and (b) receiving preference over common stockholders in the distribution of assets upon liquidation. Home

End of Home