1. CORPORATIONS: ORGANIZATIONS AND CAPITAL STOCK
CHAPTER TWENTY-TWO
CORPORATIONS: ORGANIZATIONS AND CAPITAL STOCK

2. CORPORATIONS
Sell more goods and services in total than sole proprietorships and partnerships combined
But there are fewer businesses organized as corporations.
Separate legal entity that exists separate from its owners
Corporation’s assets and liabilities are those of the business, not the owners.
Corporation can own property, enter into contracts and incur debt in its own name. It can sue and be sued.

3. LIMITED LIABILITY OF OWNERS
CHARACTERISTICS
LIMITED LIABILITY OF OWNERS
Owners of a corporation generally have no personal liability for the debts of the corporation.
Major advantage
of corporations

4. TRANSFERABLE OWNERSHIP UNITS
CHARACTERISTICS
TRANSFERABLE OWNERSHIP UNITS
Owner’s equity in a corporation is called Capital Stock. Capital Stock is divided into shares that can be transferred from one person to another without the consent of the other owners and without disturbing the corporation’s normal activities.

5. EASE OF RAISING CAPITAL
CHARACTERISTICS
EASE OF RAISING CAPITAL
The limited liability and transferable ownership characteristics are attractive to investors. Therefore, a corporation generally can obtain capital by selling additional shares of stock.

6. CHARACTERISTICS NO MUTUAL AGENCY
Unlike partnerships, in a corporation individual owner’s do not have the power to act as an agent of the business.

7. CHARACTERISTICS UNLIMITED LIFE
The corporation’s charter states the life as either perpetual or renewable. Changes in ownership have no effect on the life of a corporation.

8. CHARACTERISTICS TAXATION OF EARNINGS
Corporations must pay income taxes. In addition, the corporation’s owners pay personal income tax on the dividends they receive. This results in “Double taxation”.
DISADVANTAGE

9. GOVERNMENT REGULATION
CHARACTERISTICS
GOVERNMENT REGULATION
Activities of the corporation are regulated by federal, state and local laws. These laws may restrict the corporation’s ownership of real property, the purchase of its own stock and the retention of its earnings.
DISADVANTAGE

10. CORPORATION States have the power to create corporations.
Incorporators file an application with the state.
Once application is approved...Charter, also called Certificate of Incorporation, is prepared, including:
Name of the corporation
Location of the principal office
Purpose of the business
Description of the capital stock
Names and addresses of the incorporators

11. TERMINOLOGY
BYLAWS - provide general guidelines for conducting the business
STOCKHOLDERS - owners in a corporation
STOCK CERTIFICATE - form that shows the name of stockholder and number of shares owned
BOARD OF DIRECTORS - elected by stockholders, determine corporate policies
OFFICERS - manage the corporation and are responsible to the board

12. CORPORATE ORGANIZATION
OWNERS
(Stockholders)
BOARD OF
DIRECTORS
Who elect the
Who Appoint the
OFFICERS (President,
Vice President, Secretary,
Treasurer)
EMPLOYEES
Who Manage the

13. ORGANIZATION COSTS EXAMPLES: Attorney Fees Incorporation Fees
Promotion
Expenses

14. It is the accepted practice to amortize Organization Costs
EXAMPLE: Neo Company charged $8,000 to Organization Costs (an Intangible Asset). These costs will be written off over a five-year period.
Organization Costs
5 years
It is the accepted practice
to amortize Organization Costs
over a 5 year period.

15. ORGANIZATION COSTS $1,600 each year Organization Costs $8,000 5 years
EXAMPLE: Neo Company charged $8,000 to Organization Costs (an Intangible Asset). These costs would be written off over a five-year period.
Organization Costs
$8,000
5 years
5 years
$1,600 each year

16. Reported under “Other Expenses” on the Income Statement
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Amortization of Org. Costs
1,600 2
Organization Costs
1,600 3 4 5
Reported under “Other Expenses”
on the Income Statement 6 7 8 9 10 11

17. SOLE PROPRIETORSHIP Owner’s Equity Two Owner’s Equity accounts
Owner, Capital
Owner, Drawing
Two Owner’s Equity accounts

18. EQUITY ACCOUNTS SOLE PROPRIETORSHIP Owner’s Equity
Owner, Capital
Owner, Drawing
2. Net Loss
1. Investments
3. Drawing
4. Closing
2. Net Income
4. Closing
All Equity transactions eventually
affect the one capital account.

19. EQUITY ACCOUNTS PARTNERSHIP Partners’ Equity Partner A, Capital
Partner A, Drawing
2. Net Loss
1. Investments
3. Drawing
4. Closing
2. Net Income
4. Closing
Partner B, Capital
Partner B, Drawing
2. Net Loss
1. Investments
3. Drawing
4. Closing
4. Closing
2. Net Income
Similar to sole proprietorship
but multiple capital and drawing accounts

20. CORPORATION Stockholders’ Equity Additional Paid-In-Capital
EQUITY ACCOUNTS
CORPORATION Stockholders’ Equity
Capital Stock
1. Investments
Only records
investments by owners
Additional Paid-In-Capital
1. Investments

21. EQUITY ACCOUNTS CORPORATION Stockholders’ Equity Capital Stock
Retained Earnings
1. Investments
2. Net Loss
2. Net Income
Separate account which
records the earnings
of the corporation
Additional Paid-In-Capital
1. Investments

22. EQUITY ACCOUNTS CORPORATION Stockholders’ Equity Capital Stock
Retained Earnings
1. Investments
2. Net Loss
2. Net Income
Corporations make a distinction between
capital invested by the owners (Paid-In-Capital)
and earnings retained in the business.
Additional Paid-In-Capital
1. Investments

23. EQUITY ACCOUNTS CORPORATION Stockholders’ Equity Capital Stock
Retained Earnings
Drawings are now Dividends and
are closed to Retained Earnings.
1. Investments
2. Net Loss
2. Net Income
4. Closing
Additional Paid-In-Capital
Dividends
1. Investments
3. Dividends
4. Closing

24. CAPITAL STOCK
AUTHORIZED STOCK - The total number of shares the corporate charter authorizes a corporation to issue
ISSUED STOCK - Stock that has been sold and issued
TREASURY STOCK - Stock that has been bought back
OUTSTANDING STOCK - Number of shares in the hands of stockholders.

25. STOCK VALUES PAR VALUE NO-PAR STOCK Dollar amount per share
Stock that has no dollar amount
Recorded in the Capital Stock account
MARKET VALUE
STATED VALUE
Amount for which the stock can be sold
Amount assigned by board of directors

26. COMMON STOCK
If corporation has only one type of stock…it’s called “Common Stock.”
Gives its owner the right to:
Vote at stockholder meetings
Share in earnings distributions
Purchase additional shares in proportion to the owner’s present holding if more shares are issued
called the “Preemptive Right”
Share in the assets if the corporation liquidates

27. PREFERRED STOCK
Type of stock that gives its owners certain rights and privileges superior to those of common stock:
for example….right to receive dividends before common stock
dividends are stated as a dollar amount or a % of par value
Don’t have common stockholders’ rights
for example... they don’t have the right to vote

28. $4 dividend for each share of
DIVIDEND ALLOCATION
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common stock outstanding. The amount available for dividends for the year is $14,000.
Preferred Stock
Common Stock
$8,000
$4 dividend for each share of
preferred stock (2000 shares)

29. DIVIDEND ALLOCATION $8,000 $6,000
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common stock outstanding. The amount available for dividends for the year is $14,000.
Preferred Stock
Common Stock
$8,000
$6,000
$14,000
Available for dividends
- 8,000
For preferred stockholders
$ 6,000
Leftover for the common shareholders

30. Depends on the type of Preferred Stock… Cumulative or NonCumulative
DIVIDEND ALLOCATION
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common stock outstanding. The company declared no dividends in year 1 and $22,000 in year 2.
Preferred Stock
Common Stock
Should we go back and give the Preferred stockholders the dividend for Year 1?
Depends on the type of Preferred Stock…
Cumulative or NonCumulative

31. DIVIDEND ALLOCATION $8,000 $8,000
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common stock outstanding. The company declared no dividends in year 1 and $22,000 in year 2.
Preferred Stock
Common Stock
$8,000
Year 1
$8,000
Year 2
Cumulative Preferred Stock accumulates
unpaid dividends from year to year.

32. DIVIDEND ALLOCATION $8,000 $6,000 $8,000 $16,000
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common stock outstanding. The company declared no dividends in year 1 and $22,000 in year 2.
$22,000-16,000
Preferred Stock
Common Stock
$8,000
$6,000
Year 1
$8,000
Year 2
$16,000
Preferred receives both years’ dividends
before Common Stock gets any dividends.

33. DIVIDEND ALLOCATION $8,000 $14,000
EXAMPLE: Pref Company has 2,000 shares of $50 par, $4 preferred stock, and 2,000 shares of $10 par common stock outstanding. The company declared no dividends in year 1 and $22,000 in year 2.
$22,000-8,000
Preferred Stock
Common Stock
$8,000
$14,000
Year 2
NonCumulative Preferred Stock
does not carry dividends from year to year.

34. PARTICIPATING PREFERRED STOCK
Gives owners the right to share with common stock owners in dividends in excess of a stated dividend rate
Rare to find anymore
NonParticipating limits the preferred stock owners to the stated dividend rate

35. CAPITAL STOCK TRANSACTIONS
Corporations issue capital stock in exchange for cash and noncash assets.
Issuance for cash is the most common transaction
Stock may be issued:
at par
at a premium, or
at a discount
Let’s look at some
examples...

36. Linc Corp. issues 10,000 shares of $5 par common stock at par
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
50,000 2
Common Stock
50,000 3
Issued common stock at par 4 5
Linc Corp. issues 10,000 shares of
$5 par common stock at par
for $50,000 cash. 6 7 8 9 10 11

37. What if the stock had been
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
60,000 2
Common Stock 3 4 5
What if the stock had been
issued for
for $60,000 cash? 6 7 8 9 10 11

38. # of shares issued x par value
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
60,000 2
Common Stock
50,000 3 4
# of shares issued x par value
10,000 shares x $5 par value 5 6 7 8 9 10 11

39. Extra received above par value
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
60,000 2
Common Stock
50,000 3
Paid-in-Capital in Excess of 4
Par--Common Stock
10,000 5
Issued common stock at a 6
premium 7
Extra received above par value 8 9 10 11

40. Linc Corp. issues 2,000 shares of
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
96,000 2
Discount on Preferred Stock
4,000 3
Preferred Stock
100,000 4
Issued preferred stock at 5
a discount 6
Linc Corp. issues 2,000 shares of
$50 par, 8% preferred stock
for $96,000 cash. 7 8 9 10 11

41. DISCOUNTS Seldom used because: firms generally set very low par values
purchaser is liable to the corporation’s creditors for the difference between the par value and the amount paid
illegal in many states

42. STATED VALUE STOCK
EXAMPLE: Stat Company issued 5,000 shares of no-par common stock with a stated value of $10 per share for $70,000 cash.
Stock may have a stated value instead of a par value. Accounting for stated value is very similar to par value….only a few account title changes.

43. # shares x stated value per share
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
70,000 2
Common Stock
50,000 3 4
# shares x stated value per share 5 6 7 8 9 10 11

44. GENERAL JOURNAL Slight change in the title of the account DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
70,000 2
Common Stock
50,000 3
Paid-in-Capital in Excess of 4
Stated Value--Com. Stock
20,000 5 6
Slight change in the
title of the account 7 8 9 10 11

45. Example: Noll Company issued 5,000 shares of no-par common
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
70,000 2
Common Stock
70,000 3 4
Example: Noll Company issued
5,000 shares of no-par common
stock for $70,000. 5 6 7 8 9 10 11

46. GENERAL JOURNAL Common Stock is credited for entire amount received.
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Cash
70,000 2
Common Stock
70,000 3 4
Common Stock is credited
for entire amount received.
A Paid-In-Capital in Excess
account is not used. 5 6 7 8 9 10 11

47. STOCK ISSUED FOR NON-CASH ASSETS
Guideline:
The assets received are recorded at the fair market value of the assets or of the stock, whichever can be more clearly determined.

48. STOCK ISSUED FOR NON-CASH ASSETS
Linc Corp. issues 5,000 shares of $5 par common stock for a truck. It is hard to determine the market value of the stock but the truck has a known market value of $30,000.

49. GENERAL JOURNAL Truck is recorded at its Fair Market Value.
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Truck
30,000 2
Common Stock
25,000 3
Paid-in-Capital in Excess 4
of Par--Common Stock
5,000 5
Truck is recorded at its Fair Market Value.
Common Stock is recorded at par.
Paid-in-Capital is credited for the difference. 6 7 8 9 10 11

50. STOCK SUBSCRIPTIONS
An agreement in which a buyer (subscriber) contracts to buy shares of stock from a corporation at a specific price.
Subscriber generally agrees to pay the amount in full on a specified date or in installments.
Stock is not issued until subscriber makes the full payment.

51. Example: Linc Corp received subscriptions
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Stock Subscriptions Receivable
60,000 2
Common Stock Subscribed
50,000 3
Paid-in-Capital in Excess 4
of Par--Common Stock
10,000 5
Example: Linc Corp received subscriptions
for 10,000 shares of its $5 par
common stock for $60,000. 6 7 8 9 10 11

52. Example: Partial Payment is received.
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Stock Subscriptions Receivable
60,000 2
Common Stock Subscribed
50,000 3
Paid-in-Capital in Excess 4
of Par--Common Stock
10,000 5 6
Cash
40,000 7
Stock Subscriptions Receiv.
40,000 8 9
Example: Partial Payment is received. 10 11

53. Example: Final Payment is received.
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 12
Cash
20,000 13
Stock Subscriptions Receiv.
20,000 14 15
Example: Final Payment is received. 16 17 18 19 20 21 22

54. GENERAL JOURNAL Stock is issued. DATE DESCRIPTION DEBIT PR CREDIT 12
Cash
20,000 13
Stock Subscriptions Receiv.
20,000 14 15
Common Stock Subscribed
50,000 16
Common Stock
50,000 17 18
Stock is issued. 19 20 21 22

55. TREASURY STOCK
When a company buys back its own stock, it’s called “Treasury Stock.”
When Treasury Stock is purchased:
debited for the amount paid
regardless of par value
Treasury Stock account is a contra-stockholders’ equity account.

56. GENERAL JOURNAL Example: Linc Corp purchases 3,000 shares
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Common Treasury Stock
18,000 2
Cash
18,000 3 4
Example: Linc Corp purchases 3,000 shares
of its $5 par common stock for $6 per share,
a total of $18,000. 5 6 7 8 9 10 11

57. GENERAL JOURNAL Example: Linc Corp sells 2,000 of the
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Common Treasury Stock
18,000 2
Cash
18,000 3 4
Cash
14,000 5
Common Treasury Stock 6 7
Example: Linc Corp sells 2,000 of the
3,000 treasury shares for $7 per share,
a total of $14,000. 8 9 10 11

58. GENERAL JOURNAL 2,000 shares x $6 per share DATE DESCRIPTION DEBIT PR
CREDIT 1
Common Treasury Stock
18,000 2
Cash
18,000 3 4
Cash
14,000 5
Common Treasury Stock
12,000 6 7
2,000 shares x $6 per share 8 9 10 11

59. GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 1
Common Treasury Stock
18,000 2
Cash
18,000 3 4
Cash
14,000 5
Common Treasury Stock
12,000 6
Paid-in-Capital from Sale 7
of Treasury Stock
2,000 8 9
Linc sells the remaining 1,000 treasury shares
for $5.50 per share, a total of $5,500. 10 11

60. GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 12 Cash 5,500 13
Paid-in-Capital from Sale 14
of Treasury Stock
500 15
Treasury Stock
6,000 16 17 18 19 20 21 22

61. Common Stock & Preferred Stock BALANCE SHEET PRESENTATION:
REVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Common Stock & Preferred Stock
STOCKHOLDERS’ EQUITY
PURPOSE:
Credited for par or stated value (if stock has one) If no-par…credited for amount received for stock issued
BALANCE SHEET PRESENTATION:
PAID-IN-CAPITAL section

62. BALANCE SHEET PRESENTATION:
REVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Paid-In-Capital in Excess of Par (or Stated Value) -Common & Preferred Stock
STOCKHOLDERS’ EQUITY
PURPOSE:
Credited for amount by which issue price exceeds par or stated value (not used when issuing no-par stock)
BALANCE SHEET PRESENTATION:
ADDITIONAL PAID-IN-CAPITAL section

63. BALANCE SHEET PRESENTATION:
REVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Discount on Common & Preferred Stock
STOCKHOLDERS’ EQUITY
PURPOSE:
Debited for amount by which par or stated value exceeds issue price
BALANCE SHEET PRESENTATION:
Deduction in the PAID-IN-CAPITAL section

64. BALANCE SHEET PRESENTATION:
REVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Common & Preferred Stock Subscription Receivable
ASSET
RECEIVABLES
ARE ASSETS!!!
PURPOSE:
BALANCE SHEET PRESENTATION:

65. BALANCE SHEET PRESENTATION:
REVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Common & Preferred Stock Subscription Receivable
ASSET
PURPOSE:
Debited for subscription price of stock
BALANCE SHEET PRESENTATION:
CURRENT ASSET section (usually)

66. BALANCE SHEET PRESENTATION:
REVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Common & Preferred Stock Subscribed
STOCKHOLDERS’ EQUITY
PURPOSE:
Credited for par or stated value (if stock has one) of stock subscribed. If no-par…credited for amount of stock subscription
BALANCE SHEET PRESENTATION:
PAID-IN-CAPITAL section

67. BALANCE SHEET PRESENTATION:
REVIEW OF NEW ACCOUNTS
ACCOUNT NAME:
TYPE OF ACCOUNT:
Paid-In-Capital from sales of Treasury Stock
STOCKHOLDERS’ EQUITY
PURPOSE:
Credited for excess of selling price over cost Debited for excess of cost over selling price
BALANCE SHEET PRESENTATION:
ADDITIONAL PAID-IN-CAPITAL section

68. Equity is separated by source:
Stockholders’ Equity
Paid-in-capital:
Equity is separated by source:
Paid-in-capital = amounts contributed by owners
Retained Earnings = accumulated, undistributed earnings

69. (20,000 shares auth., 14,000 shares issued) $140,000
Stockholders’ Equity
Paid-in-capital:
Preferred stock, 7%, $10 par
(20,000 shares auth., 14,000 shares issued)
$140,000
Preferred stock subscribed (6,000 shares)
60,000
$200,000
Preferred stock is listed first
because of its preferred claim
to dividends and assets.

70. (20,000 shares auth., 14,000 shares issued) $140,000
Stockholders’ Equity
Paid-in-capital:
Preferred stock, 7%, $10 par
(20,000 shares auth., 14,000 shares issued)
$140,000
Preferred stock subscribed (6,000 shares)
60,000
$200,000
Common stock, no par
(40,000 shares auth., 16,300 shares issued)
$163,000
Common stock subscribed (4,000 shares)
40,000
203,000
Additional paid-in-capital:
Paid-in-capital in excess of par-preferred
$56,000
Paid-in-capital from sale of treasury stock
600
56,600
Total paid-in-capital
$459,600
Paid-in-capital is further separated by source….
Preferred, common, subscriptions, excess of par, etc.

71. (20,000 shares auth., 14,000 shares issued) $140,000
Stockholders’ Equity
Paid-in-capital:
Preferred stock, 7%, $10 par
(20,000 shares auth., 14,000 shares issued)
$140,000
Preferred stock subscribed (6,000 shares)
60,000
$200,000
Common stock, no par
(40,000 shares auth., 16,300 shares issued)
$163,000
Common stock subscribed (4,000 shares)
40,000
203,000
Additional paid-in-capital:
Paid-in-capital in excess of par-preferred
$56,000
Paid-in-capital from sale of treasury stock
600
56,600
Total paid-in-capital
$459,600
Stock characteristics are indicated….
Dividend rate for preferred, Par or no par value

72. (20,000 shares auth., 14,000 shares issued) $140,000
Stockholders’ Equity
Paid-in-capital:
Preferred stock, 7%, $10 par
(20,000 shares auth., 14,000 shares issued)
$140,000
Preferred stock subscribed (6,000 shares)
60,000
$200,000
Common stock, no par
(40,000 shares auth., 16,300 shares issued)
$163,000
Common stock subscribed (4,000 shares)
40,000
203,000
No. of shares authorized,
subscribed, issued and held
as treasury are indicated.
Additional paid-in-capital:
Paid-in-capital in excess of par-preferred
$56,000
Paid-in-capital from sale of treasury stock
600
56,600
Total paid-in-capital
$459,600
Retained Earnings
60,000
$519,600
Less treasury stock (2,000 shares at cost)
22,000
Total stockholders’ equity
$497,600

73. Retained Earnings is listed after all paid-in-capital.
Stockholders’ Equity
Paid-in-capital:
Preferred stock, 7%, $10 par
(20,000 shares auth., 14,000 shares issued)
$140,000
Preferred stock subscribed (6,000 shares)
60,000
$200,000
Retained Earnings is listed
after all paid-in-capital.
Common stock, no par
(40,000 shares auth., 16,300 shares issued)
$163,000
Common stock subscribed (4,000 shares)
40,000
203,000
Additional paid-in-capital:
Paid-in-capital in excess of par-preferred
$56,000
Paid-in-capital from sale of treasury stock
600
56,600
Total paid-in-capital
$459,600
Retained Earnings
60,000
$519,600
Less treasury stock (2,000 shares at cost)
22,000
Total stockholders’ equity
$497,600

74. Stockholders’ Equity
Paid-in-capital:
Preferred stock, 7%, $10 par
(20,000 shares auth., 14,000 shares issued)
$140,000
Preferred stock subscribed (6,000 shares)
60,000
$200,000
Common stock, no par
(40,000 shares auth., 16,300 shares issued)
$163,000
Common stock subscribed (4,000 shares)
40,000
203,000
Additional paid-in-capital:
Paid-in-capital in excess of par-preferred
$56,000
Paid-in-capital from sale of treasury stock
600
56,600
Total paid-in-capital
$459,600
Retained Earnings
60,000
$519,600
Less treasury stock (2,000 shares at cost)
22,000
Total stockholders’ equity
$497,600

75. Treasury stock is subtracted from total of paid-in-capital and
Stockholders’ Equity
Paid-in-capital:
Preferred stock, 7%, $10 par
(20,000 shares auth., 14,000 shares issued)
$140,000
Preferred stock subscribed (6,000 shares)
60,000
$200,000
Common stock, no par
(40,000 shares auth., 16,300 shares issued)
$163,000
Treasury stock is subtracted from
total of paid-in-capital and
retained earnings.
Common stock subscribed (4,000 shares)
40,000
203,000
Additional paid-in-capital:
Paid-in-capital in excess of par-preferred
$56,000
Paid-in-capital from sale of treasury stock
600
56,600
Total paid-in-capital
$459,600
Retained Earnings
60,000
$519,600
Less treasury stock (2,000 shares at cost)
22,000
Total stockholders’ equity
$497,600