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chap 12
Chapter 12-1 Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings Chapter Chapter 12 12 Chapter Chapter 12 12 Financial Accounting, Sixth Edition Chapter 12-2 1. Identify the major characteristics of a corporation. 2. Record the issuance of common stock. 3. Explain the accounting for treasury stock. 4. Differentiate preferred stock from common stock. 5. Prepare the entries for cash dividends and stock dividends. 6. Identify the items that are reported in a retained earnings statement. 7. Prepare and analyze a comprehensive stockholders’ equity section. Study Objectives Study Objectives Study Objectives Study Objectives Chapter 12-3 Cash dividends Cash dividends Stock dividends Stock dividends Stock splits Stock splits Corporate Corporate Organization Organization and Stock and Stock Transactions Transactions Corporate Corporate Organization Organization and Stock and Stock Transactions Transactions Dividends Dividends Dividends Dividends Retained Retained Earnings Earnings Retained Retained Earnings Earnings Statement Statement Presentation and Presentation and Analysis Analysis Statement Statement Presentation and Presentation and Analysis Analysis Corporate form of Corporate form of organization organization Common stock Common stock issues issues Treasury stock Treasury stock Preferred stock Preferred stock Retained earnings Retained earnings restrictions restrictions Prior period Prior period adjustments adjustments Retained earnings Retained earnings statement statement Presentation Presentation Analysis Analysis Corporations: Organization, Stock Corporations: Organization, Stock Transactions, Dividends and Retained Earnings Transactions, Dividends and Retained Earnings Corporations: Organization, Stock Corporations: Organization, Stock Transactions, Dividends and Retained Earnings Transactions, Dividends and Retained Earnings Chapter 12-4 An entity separate and distinct from its owners. The Corporate Form of Organization The Corporate Form of Organization The Corporate Form of Organization The Corporate Form of Organization Classified by Purpose Not-for-Profit For Profit Classified by Ownership Publicly held Privately held McDonald’s Ford Motor Company PepsiCo Google Salvation Army American Cancer Society Gates Foundation Cargill Inc. Chapter 12-5 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation Characteristics of a Corporation Characteristics of a Corporation Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. SO 1 Identify the major characteristics of a corporation. Advantages Disadvantages Chapter 12-6 Characteristics of a Corporation Characteristics of a Corporation Characteristics of a Corporation Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. SO 1 Identify the major characteristics of a corporation. Stockholders Chairman and Board of Directors President and Chief Executive Officer General Counsel and Secretary Vice President Marketing Vice President Finance/Chief Financial Officer Vice President Operations Vice President Human Resources Treasurer Controller Illustration 12-1 Corporation organization chart Chapter 12-7 File application with the Secretary of State. State grants charter. Corporation develops by-laws. Initial Steps: Forming a Corporation Forming a Corporation Forming a Corporation Forming a Corporation SO 1 Identify the major characteristics of a corporation. SO 1 Identify the major characteristics of a corporation. Companies generally incorporate in a state whose laws are favorable to the corporate form of business (Delaware, New Jersey). Corporations expense organization costs as incurred. Chapter 12-8 1. Vote in election of board of directors and on actions that require stockholder approval. Stockholders have the right to: Ownership Rights of Stockholders Ownership Rights of Stockholders Ownership Rights of Stockholders Ownership Rights of Stockholders SO 1 Identify the major characteristics of a corporation. SO 1 Identify the major characteristics of a corporation. 2. Share the corporate earnings through receipt of dividends. Illustration 12-3 Chapter 12-9 3. Keep the same percentage ownership when new shares of stock are issued (preemptive right*). Stockholders have the right to: Ownership Rights of Stockholders Ownership Rights of Stockholders Ownership Rights of Stockholders Ownership Rights of Stockholders SO 1 Identify the major characteristics of a corporation. SO 1 Identify the major characteristics of a corporation. * A number of companies have eliminated the preemptive right. Illustration 12-3 Chapter 12-10 4. Share in assets upon liquidation in proportion to their holdings. This is called a residual claim. Stockholders have the right to: Ownership Rights of Stockholders Ownership Rights of Stockholders Ownership Rights of Stockholders Ownership Rights of Stockholders SO 1 Identify the major characteristics of a corporation. SO 1 Identify the major characteristics of a corporation. Illustration 12-3