Stockholders Equity - University of Texas at Arlington：股东权益-德克萨斯大学阿灵顿.ppt

Stockholders’ Equity Chapter 9 Learning Objective 1 Explain the advantages and disadvantages of a corporation. Characteristics of a Corporation Separate legal entity Continuous life and transferability of ownership Limited liability for shareholders—limited to their investment Separation of ownership and management Corporations, unlike other businesses, are separate taxable entities Government regulation Advantages of a Corporation Can raise more capital than a proprietorship or partnership can Continuous life Ease of transferring ownership Limited liability of stockholders Disadvantages of a Corporation 1. Separation of ownership and management Tyco CEO allegedly looted the company Enron special purpose entitites [SPE’s] abuses 2. Corporate taxation: Double taxation Franchise taxes to remain incorporated 3. Government regulation: State regulation Federal legislation for public corporations Authority Structure of a Corporation Stockholders’ Rights Stockholders’ Equity Two main components: Paid-in capital (contributed capital) Retained earnings Capital Stock Authorized number of shares is limited by corporate charter Outstanding shares are those which have been sold Capital Stock Capital Stock Learning Objective 2 Measure the effect of issuing stock on a company’s financial position. Common Stock at Par Suppose IHOP’s common stock has a par value of $10 per share. The company issues 6,200 shares of common stock at par. What is the entry? Common Stock at Par Suppose IHOP’s common stock has a par value of $0.01 per share. The company issues 6,200 shares of common stock for $10 per share. What is the entry? Common Stock Above Par Common Stock at Par Suppose IHOP’s common stock is no par value stock. The company issues 6,200 shares of common stock for $20 per share. What is the entry? Preferred Stock Accounting for preferred stock follows the pattern illustrated for common stock. Learning Objective 3 Describe how treasury stock transactions affect a