Chap011

Chapter 11 Owners’ Equity
A Overview of Capital Stocks
B Sale and Issuance of Common Stock
C Treasury Stock
D Cash Dividends, Stock Dividends, and Stock
Splits
E Preferred Stock

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A. Authorized, Issued, and Outstanding Shares
Authorized shares are the maximum number of shares of capital stock that can be sold to the public.

Issued shares are authorized shares of stock that have been sold. Unissued shares are authorized shares of stock that never have been sold.
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Authorized, Issued, and Outstanding Shares
Outstanding shares are issued shares that are owned by stockholders.

Issued
Shares

Outstanding
Shares

Unissued
Shares
Treasury shares are issued shares that have been reacquired by the corporation. Treasury
Shares

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Common Stock
Basic
voting stock Dividend set by board of directors Ranks after
Preferred
Stock

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Preferred Stock
Preference
over common stock Usually has a fixed dividend rate Usually has no voting rights

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Accounting for Capital Stock
Two primary sources of stockholders’ equity
Contributed
capital
Common
stock, par value Retained earnings Capital in excess of par value
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Stockholders’ Equity Section of
Balance Sheet
Quest, Inc.
Balance Sheet (Stockholders' Equity Section)
December 31, 2012
Preferred stock, $1 par value,
100,000 shares authorized; none issued
Common stock - $1 par value,
250,000 shares authorized;
100,000 shares issued
Capital in excess of par value
Treasury Stock, at cost, 5,000 shares
Total contributed capital
Retained earnings
Total stockholders' equity

-----

$

$
$

100,000
8,000
(5,200)
102,800
35,000
137,800
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B. Sale and Issuance of Common Stock
Initial public offering
(IPO)

Seasoned new issue

The first time a corporation sells stock to the public.

Subsequent sales of new stock to the public. Sonic

Sonic issues new stock. 8

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