1. Chapter 14
Sale of shares

2. CORPORATE CAPITAL Shareholders’ equity (owner’s equity)
The shareholders’ equity section of a corporation’s balance sheet consists of:
Contributed capital
Share capital
Additional contributed capital
Retained earnings

3. SHAREHOLDERS’ EQUITY SECTION
Contributed capital
Common shares, 100,000 no par value shares authorized, 50,000 issued
Retained earnings
Total shareholders’ equity
$800,000
130,000
$930,000

4. ISSUING NO PAR VALUE COMMON SHARES FOR CASH
Shares are most commonly issued for cash. When no par value common shares are issued, the entire proceeds from the issue becomes legal capital.
Account Titles and Explanation
Debit
Credit
Cash
1, ,000
Common Shares
To record issue of 1,000 shares.

5. ISSUING STATED VALUE COMMON SHARES FOR CASH
When common shares have a stated value, the stated value is credited to Common Shares. When the selling price exceeds the stated value, the excess is credited to Contributed Capital in Excess of Stated Value.
Account Titles and Explanation
Debit
Credit
Cash
5, , ,000
Common Shares
Contributed Capital in Excess of Stated Value
To record issue of 1,000 shares.

6. SHAREHOLDERS’ EQUITY - CONTRIBUTED CAPITAL IN EXCESS OF STATED VALUE
Common shares, 10,000 shares of $1 stated value authorized,
2,000 shares issued
Contributed capital in excess of stated value
Total contributed capital
Retained earnings
Total shareholders’ equity
$ 2,000
4,000
6,000
27,000
$33,000

7. ISSUING COMMON SHARES FOR SERVICES OR NON-CASH ASSETS
Shares may be issued for services, such as compensation to lawyers, or for non-cash assets, such as land.
When common shares are issued for services or non-cash assets, cost is either the fair market value of the consideration given up or the consideration received, whichever is more clearly determinable.

8. PREFERRED SHARES
Preferred shares have priority over common shares with regards to:
1. Dividends and
2. Assets in the event of liquidation
Preferred shareholders usually do not have voting rights
Preferred shares are shown first in the share capital section of shareholders' equity

9. PREFERRED SHARE PREFERENCES
Liquidation preference
Cumulative (dividends in arrears)
Convertible (book value)
Redeemable/callable (company option)
Retractable (shareholder option)

10. SHAREHOLDERS’ EQUITY PRESENTATION
ZABOSCHUK INC.
Partial Balance Sheet
Shareholders’ equity
Contributed capital
Share capital
$9 preferred shares, no-par value, cumulative, 10,000 shares authorized, 6,000 shares issued
Common shares, $5 stated value, unlimited shares authorized, 400,000 shares issued
Total share capital
Additional contributed capital
Contributed capital in excess of stated value - common shares
Total contributed capital
Retained earnings
Total shareholders’ equity
$ ,000
2,000,000
2,770,000
860,000
3,630,000
1,058,000
$4,688,000