180 likes | 336 Views
Stockholder’s Equity. Why are we studying Stockholders’ Equity Owners Investments Residual Equity Required Reconciliation Statement. 2. Components of Shareholders Equity. Capital Stock Preferred Stock Additional Paid in Capital Treasury Stock Other changes in Assets Accounts Investments
E N D
Why are we studying Stockholders’ Equity • Owners Investments • Residual Equity • Required Reconciliation Statement
2. Components of Shareholders Equity • Capital Stock • Preferred Stock • Additional Paid in Capital • Treasury Stock • Other changes in Assets Accounts • Investments • Pensions • Foreign Currency
Preferred Stock • 1. preferred as to dividends • 2. preference as to assets upon liquidation • 3. convertible into common stock • 4. callable at option of corporation • 5. non-voting
Preferred Stock • Cumulative preferred • Dividends in arrears • Participating preferred • Convertible preferred • Participation limited • Callable preferred • Call premium
Preferred Stock With WarrantsAPB 14 • PS$ = FMV-PS/ (FMV-PS+FMV-warrants) x proceeds • W$ = FMV-Warrants/ (FMV-PS+FMV-warrants) x proceeds • PS = 115,192 = 119,000/(119,000+6,000)x121,000 • Warrants = 5,808 = 6,000/(119,000+6,000)x121,000
4. Treasury Stock • Why? • Non taxable to shareholders • Increase Earnings per Share • Increase return on Equity • To provide shares for compensation agreements • To thwart take over attempts • To make a market for the stock
Treasury Stock • Treasury stock is not an asset • Treasury stock is issued but not outstanding • Accounting for Purchase • Cost method • Par value method (seldom used)
Green MailBlack Mail? • When Common stock is re-acquired at a price substantially greater than the market value • Thwart takeover attempt • Seller may agree to • Restrict purchases • Abandon acquisition