1. Corporations: Stock Values, Dividends, Treasury Stock, and Retained Earnings
Chapter 19 2

2. Calculating the book value of preferred and common stock.
Learning Objective 1
Calculating the book value of
preferred and common stock. 4

3. Learning Unit 19-1 (Understanding Values)
Redemption Value
Market Value 4

4. Learning Unit 19-1 (Understanding Values)
Book value
per share
Total stockholders’ equity
Total shares outstanding =
Book value
preferred
Redemption value + Dividends in arrears
Number of shares of preferred stock outstanding =
Book value
common
Stockholders’ equity – Amount assigned to preferred
Number of shares of common stock outstanding =

5. Learning Unit 19-1 (Understanding Values)
Stockholders’ Equity
Paid-in Capital:
Common Stock, $25 par value, 10,000 shares
authorized, issued, and outstanding $250,000
Paid-in capital in excess of par – common ,000
Total paid-in capital $360,000
Retained earnings ,000
Total stockholders’ equity $450,000
Book value per share: $450,000 ÷ 10,000 = $45

6. Learning Unit 19-1 (Understanding Values)
Ryan Corporation
Stockholders’ Equity
Paid-in capital:
Preferred 7% stock, $100 par value, authorized
3,000 shares cumulative and nonparticipating,
2,000 shares issued and outstanding $200,000
Paid-in capital in excess of par – preferred ,000
Total paid-in capital by preferred stockholders $210,000
Common stock, $50 par value, authorized 12,000
shares, 10,000 shares issued and outstanding 500,000
Paid-in capital in excess of par value – common ,000
Total paid-in capital by common stockholders ,000
Total paid-in capital $730,000

7. Learning Unit 19-1 (Understanding Values)
Ryan Corporation
Stockholders’ Equity
Total paid-in capital $730,000
Retained earnings ,000
Total stockholders’ equity $894,000
Redemption value ($103/share × 2,000 shares) $206,000
Dividends in arrears ,000 (220,000)
Equity allocated to common stock $674,000
Book value per share preferred:
$206,000 + $14,000 ÷ 2,000 = $110
Book value per share common:
$894,000 – 220,000 ÷ 10,000 = $67.40

8. Journalizing entries to record issuance of a cash dividend
Learning Objective 2
Journalizing entries to record
issuance of a cash dividend
and a stock dividend. 4

9. Learning Unit 19-2 (Dividends)
Date of declaration
Date of record
Date of payment 4

10. Learning Unit 19-2 (Dividends)
On March 8, 20xx, the board of Tell Corporation
declares a $2 cash dividend per share on the
5,000 shares issued and outstanding.
Accounts Affected Category Rules
Retained Earnings SE Dr. 10,000
Dividends Payable Liability Cr. 10,000

11. Learning Unit 19-2 (Dividends)
A stock dividend is a distribution of the
corporation’s own stock to shareholders.
It is a transfer of Retained
Earnings to Paid-in Capital.
It does not affect total stockholders’ equity.

12. Learning Unit 19-2 (Dividends)
Jesse Corporation, with 10,000 shares of $20 par
value common stock outstanding, declares a 10%
stock dividend when the shares are trading at $30.
How many shares are issued in the dividend?
10,000 × 10% = 1,000 shares

13. Learning Unit 19-2 (Dividends)
Retained Earnings 30,000
Common Stock
Dividend Distributable ,000
Paid-In Capital in Excess of
Par Value – Stock Dividend 10,000
Declaration of a 10% common stock dividend

14. Learning Unit 19-2 (Dividends)
A stock split will... 1
increase the number of shares outstanding. 2
reduce the par or stated value in proportion. 6

15. Journalizing the purchase and sale of treasury stock.
Learning Objective 3
Journalizing the purchase
and sale of treasury stock. 4

16. Learning Unit 19-3 (Treasury Stock)
Treasury stock is the corporation’s
own shares of issued stock.
Treasury stock has a debit balance.
It is not an asset.
The corporation buys the shares on the
stock market, or directly from shareholders.

17. Learning Unit 19-3 (Treasury Stock)
The stock is held in the treasury and used
for issuance in stock options plans, etc.
Dividends are not paid on the treasury stock.
It is not outstanding.

18. Learning Unit 19-3 (Treasury Stock)
On June 1, 20xx, Ashly Corporation
purchased 1,000 shares of its own
$10 par value common stock at $12
per share (5,000 shares are outstanding).
What is the journal entry?
Treasury Stock – Common 12,000
Cash ,000
Purchase of previously issued stock

19. Learning Unit 19-3 (Treasury Stock)
Treasury stock can be reissued at a price above
or below the cost of reacquiring the stock.
Excess of sales price over cost is credited
to Paid-in Capital from Treasury Stock.
Assume that on July 8, Ashly Corporation
sells 100 shares of treasury stock at $15.

20. Learning Unit 19-3 (Treasury Stock)
Cash ,500
Treasury Stock – Common 1,200
Paid-In Capital from
Treasury Stock
Sold 100 shares of treasury stock

21. Learning Objective 4
Preparing a statement
of retained earnings. 4

22. Learning Unit 19-4 (Appropriations of Retained Earnings)
Retained earnings appropriation is
the amount of retained earnings
that is not available for dividends.
No actual cash “set asides” are involved
in the appropriation of retained earnings.

23. Learning Unit 19-4 (Appropriations of Retained Earnings)
It can be noted in a memo entry or an actual
journal entry that debits Retained Earnings
and credits Appropriation (for a purpose).
The restriction can be contractual or voluntary.

24. Learning Unit 19-4 (Appropriations of Retained Earnings)
Ralston Company
Statement of Retained Earnings
Year Ended December 31, 20x2
Retained earnings, Jan. 1, 20x2 $350,000
Less: Prior period adjustment:
Correction of 20x1 error ,000
Retained earnings, Jan, 20x2, corrected $338,000
Add: Net income for 20x ,000
Total $378,000
Deduct: Dividends declared in 20x ,000
Retained earnings, Dec. 31, 20x2 $350,000

25. End of Chapter 19