Bài giảng môn Kế toán, kiểm toán - Chapter 8: Accounting for and presentation of stockholders’ equity

© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.Chapter 8Accounting for and Presentation of Stockholders’ Equity PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPANature of Stockholders’ EquityRetainedEarningsPar orStatedValueAdditionalPaid-InCapitalPar orStatedValueAdditionalPaid-InCapitalTreasuryStockLessTotal Stockholders’ EquityPaid-in CapitalPreferredStockCommonStock8-3Stockholders’ Equity SectionLO 18-4Common StockAuthorizedSharesIssued shares that are owned by stockholders.Issued shares that have been reacquired.Issued shares include outstanding and treasury shares.LO 1Issued Shares8-5Preferred StockNormally no votingrights, but dividend payment haspreference overcommon stock.Has a par or statedvalue with dividendexpressed as apercent of par.If callable,may be retired. If convertible, may beexchanged forcommon shares.LO 28-6Preferred Stock Versus BondsLO 28-7Additional Paid-in CapitalRepresents the excess of the amount received from the sale of preferred or common stock over par (or stated) value.LO 28-8Retained EarningsRepresents the cumulative earnings of a corporation less the cumulative dividends paid since the business started operations.Retained earnings is NOT cash.LO 28-9Cash DividendsDividends must bedeclared by the boardof directors beforethey can be legally paid.The company is notlegally required topay dividends, butonce declared alegal liabilityis created.The company must have sufficient cash andretained earningsto pay the dividend.LO 38-10Stock DividendsNo change in par value of stock or in total stockholders’ equity.Stockholders retain percentage ownership in the company (preemptive right)Distribution of additional shares of stock to stockholders.Reasons for stock dividends:Preserve cash. Decrease market price of stock.Reduce retained earnings. LO 48-11Stock SplitNo change tototalstockholders’equity.No journal entry required.Decrease the parvalue per share.Increase thenumber of sharesoutstanding.LO 48-12Other Comprehensive Income A new category in stockholders’ equity called accumulated other comprehensive income (loss) includes the following unrealized changes to stockholders’ equity:Cumulative foreign currency translation adjustments;Unrealized gains or losses on available-for-sale investments;Changes during the period in certain pension or other postretirement benefit items; andGains or losses on certain derivative instruments.LO 58-13Reporting Changes in Stockholders’ Equity AccountsLO 78-14Noncontrolling InterestNoncontrolling interest is also known as a minority interest. It is the portion of equity in a subsidiary not attributable to the parent company. The balance sheet model can be expanded as follows:ASSETS = LIABILITIES+(STOCKHOLDERS’ EQUITY + NON-STOCKHOLDERS’ EQUITY)LO 88-15Proprietorships and PartnershipsProprietorships (single owner) and partnerships (two or more owners) do not issue stock.ProprietorshipPartnershipDrawing accounts are distributions to owners similar to dividends.Net income and drawing accounts are transferred to capital accounts at the end of the period.LO 88-16End of Chapter 88-17