1 / 18

GLENCOE / McGraw-Hill

GLENCOE / McGraw-Hill. Corporate Earnings and Capital Transactions. Other Capital Transactions and Financial Statements. Section Objectives. 10. Record a corporation’s receipt of donated assets. 11. Record treasury stock transactions.

neve-fry
Download Presentation

GLENCOE / McGraw-Hill

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. GLENCOE / McGraw-Hill

  2. Corporate Earnings and Capital Transactions

  3. Other Capital Transactions and Financial Statements Section Objectives 10. Record a corporation’s receipt of donated assets. 11. Record treasury stock transactions. 12. Prepare financial statements for a corporation.

  4. Page 784 Transactions Affecting Stockholders’ Equity • We have already discussed certain transactions that affect stockholders’ equity: • Capital Stock Transactions • Dividends • Other types of transactions can affect stockholders’ equity: • Donated capital • Treasury stock

  5. QUESTION: What is donated capital? ANSWER: Donated capital is capital resulting from the receipt of gifts by a corporation. Page 784 Donated capital is recorded at its fair market value.

  6. 2005 Jan. 2 Land 100,000.00 Donated Capital 100,000.00 Appraised value of plant site donated by city Page 784 A community that wishes to attract new industry may give a corporation a plant site or building as an inducement for the corporation to move to the community.

  7. QUESTION: What is treasury stock? ANSWER: Treasury stock is a corporation’s own capital stock that has been issued and reacquired. Page 784

  8. Page 784 Treasury Stock • No dividends • No voting rights • No liquidation preferences

  9. Page 785 Treasury Stock Why do corporations purchase their own stock? • The corporation has extra cash. • The corporation offers treasury stock as incentive plans for officers. • The corporation wants to create a demand for the stock, thus increasing its market value. • The corporation can purchase shares of stockholders who need cash or want to retire (privately held corporations).

  10. 2005 Jan. 10 Treasury Stock - Preferred 21,000.00 Cash 21,000.00 Purchased 200 shares of treasury stock Page 785 Record the Purchase of Treasury Stock

  11. Page 785 Appropriation of Retained Earnings for Treasury Stock • Purchase of treasury stock reflects a payment to a shareholder, which reduces capital. • Certain states require that retained earnings be appropriated in an amount equal to the cost of treasury stock.

  12. Page 785 Appropriation of Retained Earnings For corporations based in states that require appropriation, the journal entry is: Debit: Retained Earnings Credit: Retained Earnings Appropriated— Treasury Stock

  13. Page 786 Financial Statements for a Corporation Four financial statements are prepared for a corporation: • Income statement • Statement of retained earnings • Balance sheet • Statement of cash flows Sneak Preview!Page 912

  14. QUESTION: What is a statement of retained earnings? ANSWER: A statement of retained earnings is a financial statement that shows all changes that have occurred in retained earnings during the period. Page 786

  15. Page 788 Statement of Stockholders’ Equity • The Securities and Exchange Commission (SEC) requires publicly held corporations to disclose reasons for major changes in equity. • The statement of stockholders’ equity provides an analysis reconciling the beginning and ending balance of each of the stockholders’ equity accounts. • There is no specified form for the statement. Various types of schedules are used.

  16. R E V I E W Complete the following sentences: Donated capital ______________ is capital resulting from the receipt of gifts by a corporation. The capital stock of a corporation that is reacquired by that corporation is known as _____________. treasury stock statement of retained earnings The ___________________________ shows all changes that have occurred in retained earnings during the period.

  17. R E V I E W Complete the following sentences: four There are ____ financial statements usually prepared for a corporation. Securities and Exchange Commission The _________________________________ requires publicly held corporations to disclose the reasons for major changes in equity. statement of stockholders’ equity The ______________________________ provides an analysis reconciling beginning and ending balances in each of the stockholders’ equity accounts.

  18. Thank You for using College Accounting, Tenth Edition Price • Haddock • Brock

More Related