ACCT 3120: CH. 18

Preferred stock may be 2 things (think types of bonds from chapter 14)

"Convertible" into shares of Common Stock(Preferred Shareholder's option) "Callable" (i.e., Company repurchases) at the Company's option

Concept Check: Dividends in Arrears The shareholders' equity of FSU Industries includes $200,000 of $1 par common stock and $400,000 par value of 6% cumulative preferred stock. The board of directors declared cash dividends of $50,000 in 2018 after paying $20,000 cash dividends in 2017 and $40,000 in 2016. What is the amount of dividends common shareholders will receive in 2018?

$22,000 2016 pref: $24,000 (*6% x 400,000) // com: 16,000 2017: pref: $20,000 (**24,000 current preference, thus 4,000 dividends in arrears // com: 0 2018: pref: $28,000 (***4,000 dividends in arrears plus the 24,000 current preference 50,000 - 28,000 = 22,000

Concept check : dividends: Ellsworth Corporation was organized on January 1, 2018. The firm was authorized to issue 150,000 shares of $1 par common stock. During 2018, Ellsworth had the following transactions relating to shareholders' equity: -Issued 20,000 shares of common stock at $7 per share -Issued 20,000 shares of common stock at $8 per share -Reported a net income of $100,000 -Paid dividends of $50,000 -Purchased 3,000 shares of treasury stock at $10 What was total shareholders' equity at the end of 2018?

$320,000 Issue of stock (20,000 ×$7)$ 140,000Issue of stock (20,000 ×$8)160,000Net income100,000Dividends(50,000) Treasury stock (3,000 ×$10)(30,000) $320,000

Treasury stock can either be ____(a)_______ or ____(b)______. and how are these two possibilitites recorded

(a) resold If resold, it can be sold (1) at Cost, (2) Above Cost, or (3) Below Cost. If resold, Total Assets and Stockholders' Equity are increased. Dr. Cash (assets increase) Cr. Treasury stock (equity increase) • If resold Above Cost, NO GAINis recognized -- but credit PIC- Treasury Stock • If resold Below Cost, NO LOSS is recognized. --- but debit PIC - Treasury Stock (b) retired If the Treasury Stock is retired (then no longer considered "issued"): Dr. Common stock (par value) Dr. Additional paid-in capital Cr. Treasury stock

4 characteristics of Shareholders' Equity

- Contributed Capital (common stock and common APIC and preferred stock and Preferred APIC) - Retained Earnings (aka: earned capital) - Treasury stock and treasury stock-- APIC - Accumulated other comprehensive income

Callable preferred stock

-Allows the corporation, at its option, to call/buy back the outstanding Preferred Stock. -All dividends in arrears must be paid if the corporation calls the Preferred Stock. -Company usually pays penalty; typically % of par value

Rather than paying dividends in "cash", a company issues shares of its own stock to stockholders as a dividend; the shares could be as or more valuable than "cash". Accounting for stock dividends varies based on the size of the stock dividend (as a % of outstanding shares of common stock): how do these sizes relate?

-If less than 25% (considered a "small" stock dividend) of the common shares outstanding, the company transfers the fair market value of the stockfrom (i.e., Debit) retained earnings. -If more than 25% (considered a "large" stock dividend) of the common shares outstanding, the company transfers the par value of the stockfrom (i.e., Debit) retained earnings.

What changes retained earnings (a stockholders' equity account)?

-Increased if a company has net income -Decreased if a company has a net loss -Decreased if Dividends are paid to the owners

best evidence of "fair value" might be: (4)

1. A quoted market price for the shares 2.A selling price established in a recent issue of shares for cash 3. Cash that would have been paid in a cash purchase of the asset or service 4. An independent appraisal of the value of the asset received

Comprehensive income can be presented using either 1 out of 2 things:

1. A single statement approach ---Termed Statement of Comprehensive Income 2. Two statement approach ---A statement separate from the income statement, so companies have both: a. an income statement b. a statement of comprehensive income All components of Comprehensive Income are presented "net of tax"

3 characteristics of cash dividends and 3 critical dates associated

1. Board of directors (BOD) must vote on the declaration of cash dividends 2. Once a dividends is declared by the BOD, a cash dividend becomes and is recorded as a liability: Dr. Dividends or Retained Earnings Cr. Dividends Payable 3. Companies do not declare or pay cash dividends on Treasury Stock (ie. dividends are only paid on outstanding shares of common stock) Critical Dates: 1. date of declaration 2. date of record 3. date of payment ----Dr. Dividends Payable -----Cr. Cash

Different types of dividends (3)

1. Cash Dividends ("by far" the most common) 2 Property Dividends (dividends in kind; "rare"). 3. Stock Dividends (get shares of the company's stock) All dividends, EXCEPT for stock dividends, reduce the total Stockholders' Equity in the corporation: Dr, Dividends or retained earnings Cr. Cash / P & E Stock dividends simply reclassify equity from 1 equity account to another Dr. Retained Earnings Cr. Common Stock

Preferred stock may have "some" or "all" of what 5 features How is preferred stock recorded?

1. Cumulative 2. Participating 3. Convertible 4. Callable 5. Redeemable Regardless of the features that the Preferred Stock may have, the sale of the Preferred Stock is recorded exactly the same: Dr. Cash Cr. Preferred Stock (Par Value) Cr. Preferred Stock -Additional Paid-In Capital

Closing Entries Recorded in Stockholders' Equity Account: 1. Revenues (equity account) 2. COGS (expense account) 3. Operating Expenses 4. Other Comprehensive Income - Foreign Currency Translation Gain

1. Dr. Revenues Cr. Retained Earnings 2. Dr. Retained Earnings Cr. COGS 3. Dr. Retained Earnings Cr. Operating Expenses 4 Dr. OCI - Foreign Currency Translation Gain Cr. Accumulated Other Comprehensive Income

The Gains/Losses that are recognized as Other Comprehensive Income (OCI) items(not reported in the Income Statement, but in the Statement of Comprehensive Income): (4)

1. Foreign Currency Translation Gains/Losses 2. Unrealized gains/losses on Available-for-Sale Debt Securities 3. Deferred Gains/Losses on Derivative Financial Instruments 4. Certain Gains/Losses on Defined Benefit Pension Plans if you do not have ANY of these 4 comprehensive income = net income

Preferred stock usually has what 4 rights

1. Preference as to dividends --Get paid dividends before Common Stockholders 2. Preference over common shareholders at liquidation -- AFTER Secured / Unsecured Creditors BUT BEFORE Common Shareholders 3. Guaranteed dividen rate IF dividends are declared by the BOD --Dividends on Preferred Stock are stated as a "percentage of par value": 5% Preferred Stock, $10 Par Value, 100,000 Shares = $50,000 Dividends 4. NO voting rights

Very rarely, common stock is sold with other securites, such as preferred stock or bonds. If the securities are sold together for a "lump-sum" price (which would be even more rare, but possible) what 2 methods are used for allocating proceeds to the different securities (Knause refer to these methods as "relative fair market value" methods)

1. Proportional method -know both of the market values 2. Incremental method -know only 1 of the market values

Companies repurchase their outstanding stock ("treasury stock") for what 6 reasons?

1. Provide stock when employees who have stock options exercise their options. 2. Increase earnings per share (i.e., if "outstanding shares" in the denominator of EPS calculation decline, then EPS increases). 3. Increases return on equity. 4. Meet potential acquisition needs. 5. Thwart takeover attempts (i.e., buyout dissident shareholders). 6. Increase the market value of the stock (i.e., law of "supply & demand"; fewer shares outstanding increases market price).

Analysts typically use the following stockholders' equity ratios to evaluate a company's profitability and long-term solvency:

1. Rate of Return on Common Stock Equity. 2. Payout Ratio. 3. Book Value Per Share.

To issue (sell) common stock or preferred stock companies must: (4)

1. Receive Articles of Incorporation and Charter. 2. Comply with Federal / State regulations to sell stock. 3. Offer shares of stock for sale: - Publicsales of stock is much more costly than private sale. - A public sale of stock is called an Initial Public Offering (IPO). IPO's require pre-registration with the Securities & Exchange Commission (SEC). ---Requires (a) underwriters who sell the stock on behalf of the corporation, (b) attorneys, and (c) independent accountants to sell the capital stock. 4. Company usually receives cash from the sale of Common or Preferred stock, and issues shares of Common or Preferred Stock to signify the shareholders' ownership.

Considerations in accounting for sales of common or preferred stock (5)

1. Sales of par value stock 2. sales of no-par value stock 3. stock sold along with other securities 4. stock sold in noncash transactions 5. costs incurred when selling stock

The sale of common or preferred stock, particularly in an IPO (initial public offering), is expensive, with direct costs exceeding $3 million (cost varies with magnitude of offering). Direct costs incurred in selling common and preferred stock include: (4) What is the recording for the costs directly related to sale of common or preferred stock

1. Underwriting costs (underwriter sells the stock). 2. Attorney and legal fees. 3. Independent auditor fees. 4. Printing costs for Prospectus (selling document) and SEC-required registration statements (Form S-1, etc.). All costs incurred that are directly related to the sale of Common or Preferred stock are recorded as a reductionin Stockholders' Equity. Dr. Additional Paid-in Capital Cr. Cash

"common rights" of common stockholders: (6)

1. Voting rights proportional to ownership (BOD voting, bylaws voting, etc). 2. Share proportionately in Net Income / Net Loss of the entity. 3. Share proportionately in dividends if they are paid (many companies don't pay dividends). 4. Share proportionately in distribution of assets upon liquidation (Secured Creditors get paid 1st, Unsecured Creditors get paid 2nd, Preferred Shareholders get paid 3rd, and if any assets remain, they get distributed to Common Stockholders). 5. An investor's loss is limited to their investment (even if the company fails, creditors can't obtain owners' personal assets). 6.Share proportionately in any new issues of stock of the same class (the Preemptive Right -more stock can't be sold to dilute an investor's ownership without the owner being given the opportunity to buy shares so that they can maintain their same percentage of ownership).

The SEC requires companies to disclose their dividend policies in the Notes to the Financial Statements, especially those where....(3)

1. Where Loan Covenants limit or prohibit the payment of dividends by the company. 2. Where companies have earnings but fail to pay dividends. 3. Where companies do not expect to pay dividends in the foreseeable future. The SEC encourages companies that consistently pay dividends to indicate whether they intend to continue this practice in the future.

There are 2 acceptable methods to account for the purchase of treasury stock from the stockholders who own it currently:

1. cost method (most widely used method) 2. par value method Treasury Stock always has a DEBITbalance and is a reduction of Stockholders' Equity (i.e., "contra-equity"). The Treasury Stock CAN NOT have a Credit balance. A company never recognizes a "gain" or a "loss" on the sale of its own stock, regardless of whether they sell their Treasury Stock above or below its cost.

5 characteristics of corporations

1. governed by corporate law in state of incorporation 2. ownership represented by shares of common stock 3. "C" corporation; the entity is taxed (not the owners) 4. "LLC" corporation; the owners are taxed (not the "entity") 5. Personal assets of "owners" are NOT at risk (only their "investment" in the capital stock at risk)

US GAAP Required Disclosures for what type of common/preferred stock shares: (5)

1. par value per share - specified in the Articles of Incorporation 2. authorized shares - maximum # of shares a company can legally issue ( specified in Articles of Incorporation) 3. Issued Shares - # of shares that have been sold to investors 4. Outstanding shares - # of shares currently held by investors/stockholders (different than "issued" only is the company has repurchased some shared for the treasury) 5. treasury/shares - # of shares ought back by the company and held in treasury (typically for reissuance to employees when the exercise stock options granted to them by the company)

3 primary forms of business organization

1. sole proprietorship 2. partnership (limited liability partnership (llp)) 3. corporation ("C" Corporation, and limited liability corporation- llc)

Rate of return illustration Marshall's Inc. had net income of $360,000, declared and paid preferred dividends of $54,000, and average common stockholders' equity of $2,550,000.

12% rate of return on equity = (net income - preferred dividends) / average common stockholders equity (360,000 - 54,000) / 2,550,000 The Rate of Return on Common Stockholders' Equity shows how many dollars of net income the company earned for each dollar invested by the owners.

Payout illustration: Midgley Co. paid cash dividends of $100,000 and earned net income of $500,000; there is no preferred stock.

20% Payout ratio = cash dividends / (net income - preferred dividends) 100,000 / 500,000

What does it mean that dividends on preferred stock are stated as a "percentage of the par value" of the preferred stock? it what is the preferred stock dividend formula

5% Preferred Stock, $10 Par Value, 100,000 Shares = $50,000 Dividends Dividends = pref stk. x par val x # of shares

Concept Check: Retained Earnings Which of the following statements is true regarding retained earnings? a. Accumulated, undistributed net income results in a credit balance in retained earnings b .A more descriptive title would be investment earnings c. Retained earnings represent accumulated, distributed net income d. An accumulated deficit results in a credit balance in retained earnings

A.

Sale of Treasury Stock BELOW Cost. Cripe sells an additional 1,000 treasury shares on March 21 at $8 per share, it records the sale as follows: B. Assume that Cripe sells an additional 1,000 shares at $8 per share on April 10.

A. Dr. Cash 8,000 Dr. Paid-in Capital from Treasury Stock 3,000 Cr. Treasury Stock 11,000 B. Dr. Cash 8,000 Dr. Paid-in Capital from Treasury Stock 1,000 Dr. Retained Earnings 2,000 Cr. Treasury Stock 11,000

Advantage and Disadvantage of one statement approach for reporting comprehensive income

Advantage-does not require the creation of a new financial statement. Disadvantage-net income buried as a subtotal on the statement. 63

Convertible preferred stock

Allows Preferred stockholders to convert shares of Preferred Stock into shares of Common Stockat some predetermined ratio established by the issuing company (i.e., 5 shares of Common Stock for each share of Preferred Stock).

Property dividends illustration: Hopkins, Inc. transferred to stockholders some of its equity investments costing $1,250,000 by declaring a property dividend on December 28, 2016, to be distributed on January 30, 2017, to stockholders of record on January 15, 2017. At the date of declaration, the securities have a market value of $2,000,000. Hopkins makes the following entries.

At Date of Declaration (December 28, 2016): Dr. Equity Investments 750,000 Cr.Unrealized Holding Gain or Loss—Income 750,000 Dr. Retained Earnings 2,000,000 Cr. Property Dividends Payable 2,000,000

Cash dividends illustration: David Freight Corp. on June 10 declared a cash dividend of 50 cents a share on 1.8 million shares payable July 16 to all stockholders of record June 24.

At Date of Declaration (June 10) Dr. Dividends/Retained Earnings 900,000 Cr.Dividends Payable 900,000 At Date of Record (June 24) No Entry At Date of Payment (July 16) Dr. Dividends Payable 900,000 Cr. Cash 900,000

Property dividends illustration: Hopkins, Inc. transferred to stockholders some of its equity investments costing $1,250,000 by declaring a property dividend on December 28, 2016, to be distributed on January 30, 2017, to stockholders of record on January 15, 2014. At the date of declaration, the securities have a market value of $2,000,000. Hopkins makes the following entries.

At date of distribution (jan 30, 2017) Dr. Property Dividends Payable 2,000,000 Cr. Equity Investments 2,000,000

In what financial statements are Stockholders Equity presented?

Balance Sheet (balances by major account) - common stock, and common stock additional paid-in capital -Preferred Stock, and Preferred Stock Additional Paid-In Capital - retained earnings -treasury stock - accumulated other comprehensive income -noncontrolling interests Statement of Stockholders' Equity (shows changes during the period in each of the above Stockholders' Equity accounts)

Concept Check: Components of Other comprehensive income Which of the following items would not be reported in the statement of comprehensive income as Other Comprehensive Income? a. Decrease in the value of available-for-sale debt securities b. Loss on postretirement benefit plan assets c. Gain on sale of equipment d. Adjustment for foreign currency translation

C. A gain on the sale of equipment would be reported in the income statement as part of Net Income.

2 Types of capital stock or contributed capital

Common stock (every corporation has common stock) Preferred stock (some corporations have preferred stock

Sectors of contributed capital and earned capital

Contributed Capital = common stock, preferred stock, and additional paid in capital Earned Capital = retained earnings

What do states have to submit in order to be incorporated (only in 1 state) What are the advantages to incorporate in certain states rather than others?

Corporation must submit Articles of Incorporation to the state in which it wants to be incorporated Many companies incorporate in Delaware (favorable tax and liability provisions). • The state of incorporation issues the corporation a Charter, giving the corporation authority to operate.

Koebele Corporation has outstanding 1,000 shares of $100 par value common stock and retained earnings of $50,000. If Koebele declares a 10 percent stock dividend, it issues 100 additional shares to current stockholders. If the fair value of the stock at the time of the stock dividend is $130 per share, the entry is:

Date of Declaration: Dr. Retained Earnings 13,000 Cr. Common Stock Dividend Distributable10,000 Cr.Paid-in Capital in Excess of Par-Common 3,000 Date of Distribution: Dr. Common Stock Dividend Distributable 10,000 Cr.Common Stock10,000

Give the journal entry for the follow situation regarding sale of preferred stock: Bishop Co. issues 10,000 shares of $10 par value preferred stock for $12 cash per share. Bishop records the issuance as follows:

Dr. Cash 120,000 Cr. Preferred Stock 100,000 Cr. Paid in capital in excess of par -preferred 20,000 NOTE: Regardless of what features, if any, that Preferred Stock may have, the sale of the Preferred Stock is recorded in exactly the same manner as shown above.

Sale of Treasury Stock ABOVE Cost. Cripe acquired 10,000 treasury share at $11 per share. It now sells 1,000 shares at $15 per share on March 10. Cripe records the entry as follows:

Dr. Cash 15,000 Cr. Treasury Stock 11,000 Cr. Paid-in Capital from Treasury Stock 4,000

Give the journal entry for the follow situation regarding sale of $10 par value stock: Blue Diamond Corporation issued 300 shares of $10 par value common stock for $4,500. Prepare the journal entry to record the issuance of the shares.

Dr. Cash 4,500 Cr. Common Stock (300 x $10)3,000 Cr. Paid-in Capital in Excess of Par Value 1,500

Give the journal entry for the follow situation regarding sale of no par value stock: Video Electronics Corp, is organized with authorized common stock of 10,000 shares without par value. If Video Electronics issues 500 shares for cash at $10 per share, it makes the following entry.

Dr. Cash 5,000 Cr. Common Stock 5,000

Give the journal entry for the follow situation regarding stock issued in non-cash transactions: The following transactions illustrate the procedure for recording the issuance of 10,000 shares of $10 par value common stock for a patent for Arganda Co., in various circumstances. 1. Arganda cannot readily determine the fair value of the patent, but it knows the fair value of the stock is $140,000. 2.Arganda cannot readily determine the fair value of the stock, but it determines the fair value of the patent is $150,000.

Dr. Patents 140,000 Cr. Common Stock 100,000 Cr. Paid-in Capital in Excess of Par -Common 40,000 Dr. Patents 150,000 Cr. Common Stock 100,000 Cr. Paid-in Capital in Excess of Par -Common 50,000

Ex: Repurchase of company stock: CripeCo. issued 100,000 shares of $1 par value common stock at a price of $10 per share. In addition, it has retained earnings of $300,000. On January 20, Cripe acquires 10,000 of its shares at $11 per share. Cripe records the reacquisition as follows.

Dr. Treasury Stock 110,000 Cr. Cash 110,000

Preferred stock may have a "cumulative dividends" provision, meaning:

If there is a Cumulative Dividends provision and the company fails to pay dividends to the Preferred Stockholders in any year (because not "declared" by the Board of Directors), thedividends must be made up in a later yearBEFORE paying dividends to Common Shareholders. --Dividends in Arrears-dividends from prior years that have not been paid: ----even if the preferred stock has a Cumulative Dividends provision, the PREFERRED STOCK DIVIDENDS ARE NOT A LIABILITY UNLESS DIVIDENDS ARE DECLARED BY THE BOARD OF DIRECTORS. -------However, any Dividends in Arrears must be disclosed in the Notes to the financial statements

3 characteristics of restrictions on retained earnings

Most restrictions on Retained Earnings arise due to Loan Covenants in Bonds, Bank Loans, Notes, etc. Restrictions are best disclosed in the Notes to the Financial Statements. Restrictions may include: (a) requirement to maintain a certain balance in Retained Earnings, (b) limit or prohibit the payment of dividends, (c) require a certain level of working capital, (d) limit or prohibit additional borrowings, etc.

2 Statement Approach of Comprehensive Income sheet totals and pages calulcations

Page 1 = Income statement Sales Revenue +COGS = Gross Profit + Operating Expenses = Net Income Page 2 = Comprehensive Income Net Income + Other comprehensive income: unrealized holding, net of tax = Comprehensive Income typically used when comprehensive income is detailed

property dividends

Property Dividends represent dividends paid to shareholders in some assets other than "cash". •When property dividends are paid to shareholders, the asset must first be "restated" from its"historical cost" to its "fair market value" at the Date of Declaration ---Any gain or loss (difference between historical cost and fair market value) is recognized in the Income Statement.

Single Statement of Comprehensive Income sheet totals / caluclation

Sales Revenue +COGS = Gross Profit + Operating Expenses = Net Income + Other comprehensive income: unrealized holding, net of tax = Comprehensive Income basically income statement with comprehensive income added

Participating preferred stock

Share with the common shareholders in any profit distribution beyond a prescribed rate (dividends get distributed in a "waterfall" between Common and Preferred shareholders).

What type of amount in the "par value" of common stock and how is it determined? When common or preferred stock is sold what happens to the par value of the stock

The "Par Value" of Capital Stock (i.e., Common or Preferred Stock) is an arbitrary amount (i.e., could be $0.01, $0.001, $1, $5, $10, or any amount) determined by a company's legal counsel and is stated in the Articles of Incorporation. When Common or Preferred Stock is sold, the Par Value of the stock is Credited to either the Common or Preferred Stock accounts in the General Ledger. ----Cash received in excess of the Par Value is credited to Paid-In Capital in Excess of Par (also called "Additional Paid-in Capital", or "APIC").

What is Stockholder's Equity? What are the various names for stockholder's equity?

The "residual amount" in the Accounting EquationAssets -Liabilities = Stockholder's Equity Various Names for Stockholders Equity: -Stockholders' Equity (multiple owners) -Stockholder's Equity (single owner) -Owner's Equity -Partners' Capital -Net Assets (used by nonprofit entities) -Net Worth

What is the purpose of stock splits? How are stock splits recorded?

The purpose of a Stock Split is to reduce the market value of shares. No entry is recorded for a Stock Split, however: The "Par Value" of the common stock is decreased, and The number of sharesof common stock outstanding is increased.

book value per common share illustration Uretz Corporation's common stockholders' equity is $1,000,000 and it has 100,000 shares of common stock outstanding

book val per share = common stockholders' equity / outstanding shares 1,000,000 / 100,000 The Book Value Per Common Share is the amount each share of common stock would receive if the company were liquidated on the basis of amounts reported in the Balance Sheet.

Concept Check: Treasury Stock Accounting and Subsequent Sale of Shares In 2018, Broyles, Inc. reacquired 3,000 shares of its common stock at $55 per share. In 2019, Broyles, Inc. reissued 1,000 shares of the stock at $75 per share. Which of the following would be included in the 2019 entry?

c. credit treasury stock for $55,000 The correct answer is c: 2018 Treasury Stock165,000 Cash165,000 2019 Cash75,000 Treasury stock ($165M/3)55,000 PIC—share repurchase20,000

stock is usually sold for ______ however, how else can stock be issued and how is it recorded in this case

cash sometimes stock may be issued for other tangible or intangible assets. - When stock is issued for property, goods or services, the stock should be recorded at the "more clearly determinable" of the: Fair value of the stock issued, or Fair value of the noncash consideration received.

Concept Check: Shared Issued for Noncash Consideration When stock is issued in exchange for property, the best evidence of fair value might be any of the following except: a.The appraised value of the property received b.The selling price of the stock in a recent transaction c.The price of the stock quoted on the stock exchange d.The average book value of outstanding stock

d. Occasionally, shares are issued for consideration other than cash, maybe services or a noncash asset. In those instances, the transaction should be recorded at the fair value of the sharesor the noncash consideration, whichever seems more clearly evident. This is consistent with the general rule for accounting for any noncash transaction.

Koebele Corporation has outstanding 1,000 shares of $100 par value common stock and retained earnings of $50,000. If Koebele declares a 30 percent stock dividend, it issues 300 additional shares to current stockholders. The fair value of the stock at the time of the stock dividend is $130 per share. The entry is:

date of declaration Dr. Retained Earnings 30,000 Cr.Common Stock Dividend Distributable30,000 Date of distribution Dr. Common Stock Dividend Distributable 30,000 Cr.Common Stock30,000

Comprehensive income represents: Comprehensive income includes:

represents all changes in Equity during a period EXCEPT investments by and dividends paid to owners includes: 1.All Revenues and Expenses reported in Net Income ---All Revenue and Expense accounts are CLOSED to RETAINED EARNINGS (in Stockholders' Equity) 2. 4 specific "Gain" / "Loss" items that aren't reported in the Income Statement but are reported as Other Comprehensive Income (OCI) Itemsin the Statement of Comprehensive Income ----These Other Comprehensive Income (OCI) items are CLOSED to ACCUMUATED OTHER COMPREHENSIVE INCOME (in Stockholders' Equity)

Dividend preference example: In 2017, Mason Co. is to distribute $50,000 as cash dividends, its outstanding common stock have a par value of $400,000, and its 6 percent preferred stock have a par value of $100,000. 1. If the preferred stock are noncumulative and nonparticipating: see notebook (43-46)

see notebook

What happens when capital stock is sold and a company has no-par value stock what happens?

the entire proceeds (generally cash) is credited to either the Common Stock or the Preferred Stock account (there is no "Additional Paid-in Capital" account).

Capital Stock System: After an IPO, shares of stock may be traded (w/o restrictions) by investors through what markets? Most companies don't have the administrative capabilities to monitor stock ownership (including cancelling and issuing new stock certificates when there is a trade of stock). Therefore many companies may....

traded through the stock market exchanges such as the New York Stock Exchange and the American Stock Exchange facilitate the trading therefore companies may .... hire a 3rd party "stock registrar" (often a bank) to maintain a list of current shareholders and who cancel and issue stock certificates when there is a stock trade