ACCT 2121 - Chapter 11: Analyzing & Reporting Shareholders Equity

The shareholders' equity section of Charles Corporation at December 31, 2022 included the following: $4 preferred shares, cumulative, 10,000 shares authorized, 4,000 shares issued Dividends were not declared on the preferred shares in 2022 and are in arrears. On September 15, 2023, the board of directors of Charles Corporation declared all of the annual dividends on the preferred shares for 2022 and 2023, to shareholders of record on October 1, 2023, payable on October 15, 2023. What is the amount of total dividends declared on preferred shares on September 15, 2023?

$32,000

What are 3 things that can influence the fair value of shares?

- Changes in interest rates - interaction between buyers and sellers - the trend of a company's net income and dividends

The statement of changes in equity discloses changes to which accounts?

- Contributed capital - Retained Earnings - Accumulated other comprehensive income

What are the 3 primary advantages of a corporate form of business organization?

- Limited liability - Ease of transferring ownership - Continuous life

What are the 3 primary differences between common and preferred shares?

- Preferred shares are generally non voting - Preferred shares have preferences for dividend payments - Preferred shares have priority claim over the assets of a company upon liquidation

What are the 3 requirements for a company to be able to pay out dividends for the year?

- the company must have sufficient cash or resources to be able to pay its liabilities. - the net realizable value of the company's assets must exceed the total of its liabilities and share capital. - the board of directors must approve the dividend.

What are the 3 reasons why a company may repurchase shares?

- to have additional shares available for use in the acquisition of other companies. - to attempt to influence the market price of the shares. - to reduce the number of shares issued; thereby, increasing earnings per share and return on equity.

What is the term for the maximum number of shares that a corporation can issue?

Authorized shares

ABC Inc. is a publicly traded company and has issued 10,000 common shares in exchange for a parcel of land on January 2. The shares were trading at $4.00 per share, and the land was valued at $50,000 on the date of the acquisition. What is the journal entry to record the issue of 10,000 common shares in exchange for land.

Dr. Land $50,000 Cr. Common shares $50,000

What is the term for authorized shares that have been sold?

Issued shares

On March 8, Daschen Inc., a publicly traded company, issued 5,700 preferred shares for cash of $30 per share. On April 20, when the shares were trading at $36, the company issued an additional 2,400 preferred shares in exchange for land with a fair value of $91,300. Prepare the journal entries for each transaction

March 8 Dr. Cash $171,000 Cr. Common Shares $171,000 April 20 Dr. Land $91,300 Cr. Preferred Shares $91,300

On May 1, Cato Corporation incorporated and authorized 203,000 preferred shares and an unlimited number of common shares. On May 2, Cato issued 1,800 common shares for $15 per share. On June 15, it issued an additional 900 common shares for $18 per share. On November 1, Cato issued 170 preferred shares for $29 per share. On December 15, it issued an additional 170 preferred shares for $34 per share. Record the share transactions.

May 2 Dr. Cash $27,000 Cr Common Shares $27,000 June 15 Dr. Cash $16,200 Cr Common Shares $16,200 Nov 1 Dr. Cash $4,930 Cr Preferred Shares $4,930 Dec 15 Dr. Cash $5,780 Cr Preferred Shares $5,780

Where are Dividends in arrears reported?

Notes to the statements