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LEGAL CAPITAL Aggregate of the par value of all issued par value shares Aggregate of the cash and the value of any contributions paid for all issued no par value shares. For example, if Sunny incorporates Sunny Sunglasses Shop and issues 25,000 common stock shares at $1 par value.
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LEGAL CAPITAL • Aggregate of the par value of all issued par value shares • Aggregate of the cash and the value of any contributions paid for all issued no par value shares. • For example, if Sunny incorporates Sunny Sunglasses Shop and issues 25,000 common stock shares at $1 par value. • If Sunny receives $2 per share: Entries as follows:
Legal Capital • Legal capital is the amount of the total proceeds received from the issuance of stock. • In this example, legal capital would equal $50,000. • In other words, Corporation Code does not allow the payment of dividends and stock buybacks in excess of Retained Earnings.
Delinquent Stock • When stock subscription is not paid on call date or on the date fixed by the Board. • The Law provides for a 30-day period from subscription date or from call date • When not paid within the period, the whole subscription will be declared delinquent • The unpaid subscription will be sold in a public auction to the highest bidder.
Delinquent Stock • Highest bidder is the one who is willing to pay the full amount of unpaid subscription for the least number of shares and will also pay the accrued interest, advertising and selling cost of delinquent shares
Treasury Shares • TREASURY STOCK • a. recorded at costb. acquired through purchase or donationc. sold at cost , above cost and below cost. d. sufficient retained earnings before acquiring own stock
Treasury Shares • Common Shares P50 par P 500,000 • Share Premium C/S 100,000 • Retained Earnings 200,000