Contabilidad Bsica II

ACCO 112
Taller Cuatro
Profesor Noel Ortiz Torres

Profesor Noel Ortiz

Universidad del Este, Universidad Metropolitana,Universidad del Turabo

Corporaciones

Objetivos
1. Definir corporacin y describir sus caractersticas,
ventajas y desventajas; comparar con la sociedad
como forma de organizar negocios.
2. Diferenciar entre el capital pagado y las ganancias
retenidas.
3. Registrar la entrada para la emisin de acciones
comunes y preferidas y describir sus caractersticas.
4. Explicar la contabilidad para las acciones en cartera.
5. Preparar la seccin del patrimonio de los accionistas
en un estado de situacin.

Corporation
Corporation organization
organization chart
chart
Stockholders

Chairman and
Board of
Directors
President and
Chief Executive
Officer

General
Counsel and
Secretary

Vice President
Marketing

Treasurer

Vice President
Finance/Chief
Financial Officer

Vice President
Operations

Controller

Vice President
Human
Resources

Forming
Forming aa Corporation
Corporation
Initial Steps:
File application with the Secretary of State.
State grants charter.
Corporation develops by-laws.
Companies generally incorporate in a state whose laws are
favorable to the corporate form of business (Delaware, New
Jersey).
Corporations expense organization costs as incurred.

Ownership
Ownership Rights
Rights of
of Stockholders
Stockholders
Stockholders have the right to:
1.

Vote in election of board of directors

and on actions that require stockholder
approval.

2.

Share the corporate earnings through

receipt of dividends.

Ownership
Ownership Rights
Rights of
of Stockholders
Stockholders
Stockholders have the right to:
3.

Keep the same percentage ownership when new shares of stock

are issued (preemptive right*).

* A number of companies have eliminated the preemptive right.

Ownership
Ownership Rights
Rights of
of Stockholders
Stockholders
Stockholders have the right to:
4.

Share in assets upon liquidation in proportion to their holdings.

This is called a residual claim.

Prenumbered
Class

Class A

Class A

COMMON STOCK

COMMON STOCK

PAR VALUE
$1 PER SHARE

PAR VALUE
$1 PER SHARE

Name of corporation
Stockholders name

Stock Certificate

Signature of
corporate official

Shares

Stock
Stock Issue
Issue Considerations
Considerations
Authorized Stock
Charter indicates the amount of stock that a
corporation is authorized to sell.
Number of authorized shares is often reported
in the stockholders equity section.

Stock
Stock Issue
Issue Considerations
Considerations
Issuance of Stock
Corporation can issue common stock directly to
investors or indirectly through an investment
banking firm.
Factors in setting price for a new issue of stock:
1.

the companys anticipated future earnings

2.

its expected dividend rate per share

3.

its current financial position

4.

the current state of the economy

5.

the current state of the securities market

Stock
Stock Issue
Issue Considerations
Considerations
Market Value of Stock
Stock of publicly held companies is traded on
organized exchanges.
Interaction between buyers and sellers determines
the prices per share.
Prices set by the marketplace tend to follow the
trend of a companys earnings and dividends.
Factors beyond a companys control, may cause dayto-day fluctuations in market prices.

Stock
Stock Issue
Issue Considerations
Considerations
Par and No-Par Value Stock
Years ago, par value determined the legal capital
per share that a company must retain in the
business for the protection of corporate creditors.
Today many states do not require a par value.
No-par value stock is quite common today.
In many states the board of directors assigns a
stated value to no-par shares.

Corporate
Corporate Capital
Capital
Common
CommonStock
Stock
Paid-in
Paid-inCapital
Capital

Account
Account

Preferred
PreferredStock
Stock

Paid-in
Paid-inCapital
Capitalin
in
Excess
Excessof
ofPar
Par
Account
Account

Account
Account

Two Primary
Sources of
Equity

Retained
RetainedEarnings
Earnings
Account
Account

Paid-in capital is the total amount of cash and other assets

paid in to the corporation by stockholders in exchange for
capital stock.

Corporate
Corporate Capital
Capital
Common
CommonStock
Stock
Paid-in
Paid-inCapital
Capital

Account
Account

Preferred
PreferredStock
Stock

Additional
AdditionalPaidPaidin
inCapital
Capital
Account
Account

Account
Account

Two Primary
Sources of
Equity

Retained
RetainedEarnings
Earnings
Account
Account

Retained earnings is net income that a corporation retains

for future use.

Corporate
Corporate Capital
Capital
Comparison of the owners equity (stockholders equity)
accounts reported on a balance sheet for a proprietorship, a
partnership, and a corporation.

Accounting
Accounting for
for Common
Common Stock
Stock Issues
Issues
Primary objectives:
1)

Identify the specific sources of paid-in

capital.

2)

Maintain the distinction between paid-in

capital and retained earnings.

The issuance of common stock affects only

paid-in capital accounts.

Accounting
Accounting for
for Common
Common Stock
Stock Issues
Issues
Viking Corporation issued 300 shares of $10 par value
common stock for $4,100. Prepare Vikings journal entry.
Cash

4,100
Common stock

(300 x $10)

Paid-in capital in excess of par

3,000
1,100

Accounting
Accounting for
for Common
Common Stock
Stock Issues
Issues
Knopfle Corporation issued 600 shares of no-par common stock for $10,200.
Prepare Knopfles journal entry if (a) the stock has no stated value, and (b) the
stock has a stated value of $2 per share.

a.

Cash

10,200

Common stock
b.

10,200

Cash
Common stock

10,200

(600 x $2)

Paid-in capital in excess of stated value

1,200
9,000

Accounting
Accounting for
for Common
Common Stock
Stock Issues
Issues
Issuing Common Stock for Services or
Noncash Assets
Corporations also may issue stock for:
Services (attorneys or consultants).
Noncash assets (land, buildings, and equipment).

Cost is either the fair market value of the consideration

given up, or the fair market value of the consideration
received, whichever is more clearly determinable.

Accounting
Accounting for
for Common
Common Stock
Stock Issues
Issues
On March 2, Leone Co. issued 5,000 shares of $5 par value common
stock to attorneys in payment of a bill for $30,000 for services
provided in helping the company to incorporate.
Organizational expense

30,000

(5,000 x $5)

25,000

Paid-in capital in excess of par

5,000

Common stock

Accounting
Accounting for
for Common
Common Stock
Stock Issues
Issues
Kane Inc.s $10 par value common stock is actively traded at a
market value of $15 per share. Kane issues 5,000 shares to
purchase land advertised for sale at $85,000. Journalize the
issuance of the stock in acquiring the land.
Land

(5,000 x $15)
Common stock

(5,000 x $10)

Paid-in capital in excess of par

75,000
50,000
25,000

Treasury stock - corporations own

stock that it has reacquired from
shareholders, but not retired.
Corporations purchase their outstanding stock:
1.

To reissue the shares to officers and employees under

bonus and stock compensation plans.

2.

To enhance the stocks market value.

3.

To have additional shares available for use in the

acquisition of other companies.

4.

To increase earnings per share.

5.

To rid the company of disgruntled investors, perhaps to

avoid a takeover.

Accounting
Accounting for
for Treasury
Treasury Stock
Stock
Common
CommonStock
Stock
Paid-in
Paid-inCapital
Capital

Account
Account

Preferred
PreferredStock
Stock
Account
Account

Two Primary
Sources of
Equity

Retained
RetainedEarnings
Earnings
Account
Account

Less:
Less:
Treasury
TreasuryStock
Stock
Account
Account

Paid-in
Paid-inCapital
Capitalin
in
Excess
Excessof
ofPar
Par
Account
Account

Accounting
Accounting for
for Treasury
Treasury Stock
Stock
Purchase of Treasury Stock
Debit Treasury Stock for the price paid to
reacquire the shares.
Treasury stock is a contra stockholders
equity account, not an asset.
Purchase of treasury stock reduces
stockholders equity.

Accounting
Accounting for
for Treasury
Treasury Stock
Stock
UC Company originally issued 15,000 shares of $1 par, common stock for
$25 per share. Record the journal entry for the following transaction:
On April 1st the company reacquired 1,000 shares for $28 per share.

Treasury stock
Cash

(1,000 x $28)

28,000
28,000

Stockholders Equity with

Treasury stock
UC Company
Balance Sheet (partial)
Stockholders' equity
Paid-in capital
Common stock, $1 par, 15,000 issued
and 14,000 outstanding
Paid-in capital in excess of par
Retained earnings
Total paid-in capital and retained earnings
Less: Treasury stock (1,000 shares)
Total stockholders' equity

15,000
360,000
200,000
575,000
28,000
$ 547,000

Both the number of shares issued (15,000), outstanding

(14,000), and the number of shares held as treasury (1,000) are
disclosed.

Accounting
Accounting for
for Treasury
Treasury Stock
Stock
Sale of Treasury Stock
Above Cost
Below Cost
Both increase total assets and stockholders
equity.

Accounting
Accounting for
for Treasury
Treasury Stock
Stock
UC Company originally issued 15,000 shares of $1 par, common
stock for $25 per share. On February 10, UC acquired 500 shares
of its stock at $28 per share. Record the journal entry for the
following transaction:
On June 1, UC sold 500 shares of its treasury stock for $30 per
share.

Cash

(500 x $30)
Treasury stock

15,000

(500 x $28)

Paid-in capital treasury stock

14,000
1,000

Accounting
Accounting for
for Treasury
Treasury Stock
Stock
UC Company originally issued 15,000 shares of $1 par, common stock for
$25 per share. On February 10, UC acquires 500 shares of its stock for
$28 per share and on May 15 sold 200 shares of treasury for $29 per
share. Record the journal entry for the following transaction:
On October 15, UC sold the remaining 300 shares of its treasury stock
for $24 per share.

Cash

(300 x $24)

7,200

Paid-in capital treasury stock

200

Retained earnings

1,000

Treasury stock

(300 x $28)

Limited
to
balance
on hand
8,400

Preferred
Preferred Stock
Stock
Features often associated with preferred stock.
1. Preference as to dividends.
2. Preference as to assets in liquidation.
3. Nonvoting.
Accounting for preferred stock at issuance is similar to that for
common stock.

Preferred
Preferred Stock
Stock
Acker Inc. issues 5,000 shares of $100 par value
preferred stock for cash at $130 per share. Journalize
the issuance of the preferred stock.
Cash

(5,000 x $130)
Preferred stock

(5,000 x $100)

Paid-in capital in excess of par

Preferred stock

650,000
500,000
150,000

Preferred stock may have a par value or no-par value.

Preferred
Preferred Stock
Stock
Dividend Preferences
Right to receive dividends before common
stockholders.
Per share dividend amount is stated as a
percentage of the preferred stocks par value or
as a specified amount.
Cumulative dividend holders of preferred
stock must be paid their annual dividend plus any
dividends in arrears before common
stockholders receive dividends.

Statement
Statement Analysis
Analysis and
and Presentation
Presentation

Statement
Statement Analysis
Analysis and
and Presentation
Presentation
Analysis
Book Value Per
Share

Total Stockholders Equity *

Number of
Common Shares Outstanding

Book value per share generally does not equal market value
per share.
* When a company has preferred stock, the preferred
stockholders claim on net assets must be deducted from
total stockholders equity.