1. Chapter 15-1 C H A P T E R 15 STOCKHOLDERS’ EQUITY Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield

2. Chapter 15-2 Sale of Treasury Stock Above Cost Below Cost Both increase total assets and stockholders’ equity. Corporate Capital LO 4 Describe the accounting for treasury stock.

3. Chapter 15-3 Corporate Capital Cash 15,000 Treasury stock11,000 Paid-in capital from treasury stock4,000 Illustration: Pacific acquired 10,000 shares of its treasury stock at $11 per share. It now sells 1,000 shares at $15 per share on March 10. Pacific records the entry as follows. LO 4 Describe the accounting for treasury stock.

4. Chapter 15-4 Corporate Capital Cash 8,000 Paid-in capital from treasury stock 3,000 Treasury stock11,000 Illustration: If Pacific sells an additional 1,000 shares of treasury stock on March 21 at $8 per share, it records the sale as follows. LO 4 Describe the accounting for treasury stock.

5. Chapter 15-5 Corporate Capital Cash 8,000 Paid-in capital from treasury stock 1,000 Retained earnings2,000 Treasury stock11,000 Illustration: Assume that Pacific sells an additional 1,000 shares at $8 per share on April 10. LO 4 Describe the accounting for treasury stock. Illustration 15-6

6. Chapter 15-6 Retiring Treasury Stock This decision results in cancellation of the treasury stock and a reduction in the number of shares of issued stock. Corporate Capital LO 4 Describe the accounting for treasury stock.

7. Chapter 15-7 Features often associated with preferred stock. 1. Preference as to dividends. 2. Preference as to assets in liquidation. 3. Convertible into common stock. 4. Callable at the option of the corporation. 5. Nonvoting. LO 5 Explain the accounting for and reporting of preferred stock. Preferred Stock

8. Chapter 15-8  Cumulative  Participating  Convertible  Callable  Redeemable LO 5 Explain the accounting for and reporting of preferred stock. Preferred Stock Features of Preferred Stock Accounting for preferred stock at issuance is similar to that for common stock.

9. Chapter 15-9 Cash 120,000 Preferred stock 100,000 Paid-in capital in excess of par20,000 Illustration: Bishop Co. issues 10,000 shares of $10 par value preferred stock for $12 cash per share. Bishop records the issuance as follows: LO 5 Explain the accounting for and reporting of preferred stock. Preferred Stock

10. Chapter 15-10 LO 6 Describe the policies used in distributing dividends. Dividend Policy Dividend distributions generally are based on accumulated profits (retained earnings). Few companies pay dividends in amounts equal to their legally available retained earnings. Why? Maintain agreements with creditors. Meet state incorporation requirements. To finance growth or expansion. To smooth out dividend payments. To build up a cushion against possible losses.

11. Chapter 15-11 1. Cash dividends. 2. Property dividends. LO 7 Identify the various forms of dividend distributions. Types of Dividends Dividends require information concerning three dates: a.Date of declaration b.Date of record c.Date of payment 3. Liquidating dividends. 4. Stock dividends.

12. Chapter 15-12 Cash Dividends Board of directors vote on the declaration of cash dividends. A declared cash dividend is a liability. Companies do not declare or pay cash dividends on treasury stock. LO 7 Identify the various forms of dividend distributions. Types of Dividends

13. Chapter 15-13 Illustration: What would be the journal entries made by a corporation that declared a $50,000 cash dividend on March 10, payable on April 6 to shareholders of record on March 25? March 10 (Declaration Date) Retained earnings50,000 Dividends payable50,000 March 25 (Date of Record) April 6 (Payment Date) Dividends payable50,000 Cash50,000 DebitCredit LO 7 Identify the various forms of dividend distributions. Cash Dividend No entry

14. Chapter 15-14 Property Dividends Dividends payable in assets other than cash. Restate at fair value the property it will distribute, recognizing any gain or loss. LO 7 Identify the various forms of dividend distributions. Types of Dividends

15. Chapter 15-15 Illustration: A dividend is declared Jan. 5th and paid Jan. 25th, in bonds held as an investment; the bonds have a book value of $100,000 and a fair market value of $135,000. Date of Declaration Investment in bonds35,000 Gain on investment35,000 and Date of Issuance Property dividend payable135,000 Investment in bonds135,000 DebitCredit Retained earnings135,000 Property dividend payable135,000 LO 7 Identify the various forms of dividend distributions. Property Dividend