Authorized, Issued, and Outstanding Capital Stock

1
Authorized, Issued, and Outstanding Capital Stock
The maximum number of shares of capital stock
that can be sold to the public.
2
Authorized, Issued, and Outstanding Capital Stock
Authorized Shares
Issued shares are authorized shares of stock that
have been sold.
Unissued shares are authorized shares of stock
that never have been sold.
3
Authorized, Issued, and Outstanding Capital Stock
Authorized Shares
Outstanding Shares
Unissued Shares
Treasury Shares
4
Types of Capital Stock
5
Common Stock
Basic voting stock
Ranks after preferred stock
Dividend set by board of directors
6
Preferred Stock
7
Dividends on Preferred Stock

• Current Dividend Preference The current
  preferred dividends must be paid before paying
  any dividends to common stock.
• Cumulative Dividend Preference Any unpaid
  dividends from previous years (dividends in
  arrears) must be paid before common dividends are
  paid.

8
Dividends on Preferred Stock
If the preferred stock is noncumulative, any
dividends not declared in previous years are lost
permanently.
9
Dividends
On June 1, 2003, a corporations board of
directors declared a dividend for the 2,500
shares of its 100 par value, 8 preferred stock.
The dividend will be paid on July 15. Which of
the following will be included in the July 15
entry? a. Debit Retained Earnings 20,000. b.
Debit Dividends Payable 20,000. c. Credit
Dividends Payable 20,000. d. Credit Preferred
Stock 20,000.
10
Dividends
On June 1, 2000 a corporations board of
directors declared a dividend for the 2,500
shares of its 100 par value, 8 preferred stock.
The dividend will be paid on July 15. Which of
the following will be included in the July 15
entry? a. Debit Retained Earnings 20,000. b.
Debit Dividends Payable 20,000. c. Credit
Dividends Payable 20,000. d. Credit Preferred
Stock 20,000.
100 8 8 dividend per share 8 2,500
20,000 total dividend
11
Par Value and No-par Value Stock
?
Par Value
Market Value
I get it!
12
No-par Value Stock
13
Accounting for Capital Stock
Two primary sources of stockholders equity
14
Sale and Issuance of Capital Stock

• On July 6, Outback issued 100,000 shares of 0.01
  par value common stock for 22 per share.

100,000 shares 0.01 par value 1,000
100,000 shares 22 per share 2,200,000
15
Capital Stock Sold for Noncash Assets and/or
Services

• On March 14, Outback issued 10,000 shares of its
  0.01 par value common stock to the Rose Law
  firms. The stock was selling for 15 per share.

10,000 shares 0.01 par value 100
10,000 shares 15 per share 150,000
16
Treasury Stock
When stock is reacquired, the corporation records
the treasury stock at cost.
17
Treasury Stock
On May 1, Outback reacquired 100,000shares of
its common stock at 20 per share. The journal
entry for May 1 is . . . .
18
Treasury Stock
On December 3, Outback reissued 10,000shares of
the treasury stock at 30 per share. The journal
entry for December 3 is . . .
10,000 shares 20 cost 200,000
10,000 shares 30 300,000
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Accounting for Cash Dividends
20
Dividend Dates

• Declaration date
• Board of directors declares the dividend.
• Record a liability.

21
Dividend Dates

• Date of Record
• Stockholders holding shares on this date will
  receive the dividend. (No entry)

X
22
Dividend Dates

• Date of Payment
• Record the dividend payment to stockholders.

23
Accounting for Stock Dividends
Distribution of additional sharesof stock to
stockholders.
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Stock Dividends
Small
Large
Stock dividend lt 25
Stock dividend gt 25
25
Stock Splits
Assume that a corporation had 5,000shares of 1
par value common stockoutstanding before a
2for1 stock split.
26
Stock Splits
Assume that a corporation had 5,000shares of 1
par value common stockoutstanding before a
2for1 stock split.
Increase
Decrease
No Change
27
End of Chapter 11