ACCT 302 - Shareholders' Equity (Ch 18)

Steps for a Quasi reorganization

1. Revalue firm's assets 2. Eliminate the deficit balance in retained earnings 3. Date retained earnings

Property Dividends

A non-cash asset distributed as dividends. Also called dividend in kind or a non-reciprocal transfer to owners. Reduces retained earnings.

Shareholders' Equity

Amounts invested by shareholders Amounts earned by the corporation

Net Assets

Assets - Liabilities

Shareholder's equity equation

Assets - Liabilities

Record Common Stock issued above par value

Debit: cash - shares x price per share Credit: Common stock - shares x par per share value Credit: Paid-in Capital - the excess of par (remainder)

Dividends

Distribution of assets the company has earned on behalf of its shareholders.

Non-cumulative Preferred Shares

Dividends not declared in any give year need never be paid.

Other comprehensive income

Non-owner changes in equity that are not reported as part of traditional income.

Four classifications within shareholders' equity

Paid-in capital, retained earnings , accumulated other comprehensive income (AOIC) and treasury stock

Right of Conversion

Preferred shareholders are allowed to exchange shares of preferred stock for common stock at a specific conversion ratio.

Participating Preferred Shares

Preferred shareholders are allowed to receive additional dividends beyond the stated amount.

Cumulative Preferred Shares

Preferred shareholders are allowed to receive all previous years of unpaid dividends (dividends in arrears).

Redemption Privilege

Preferred shareholders are allowed to return their shares for a predetermined redemption price.

Debt

Represents a creditor's interest that must be paid

Equity

Represents and ownership interest in the company

Treasury Stock

Shares of stock that are repurchased and not retired

Liquidating Dividend

The excess when the dividend exceeds the balance in retained earnings.