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Accounting 3

Accounting 3. Chapter 26 Section 2 Preparing a Statement of Stockholders’ Equity. Capital Stock Section of the Statement of Stockholders’ Equity. Statement of Stockholders’ Equity – A financial statement that shows changes in a corporation’s ownership for a fiscal period.

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Accounting 3

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  1. Accounting 3 Chapter 26 Section 2 Preparing a Statement of Stockholders’ Equity

  2. Capital Stock Section of the Statement of Stockholders’ Equity • Statement of Stockholders’ Equity – A financial statement that shows changes in a corporation’s ownership for a fiscal period. • Par Value – A value assigned to a share of stock and printed on the stock certificate. • Two major sections – Capital Stock and Retained Earnings.

  3. Capital Stock Section of the Statement of Stockholders’ Equity • A statement of stockholders’ equity is similar to the owner’s equity statement for a partnership. • The amount of capital stock issued at the beginning of the year is the beginning balance of the capital stock account. • Any additional stock transactions recorded in the general ledger during the fiscal year would be added up to calculate the amount of stock issued during the fiscal year. • So, the amounts in the capital stock section of the income statement are obtained from the general ledger account, Capital Stock.

  4. Capital Stock Section of the Statement of Stockholders’ Equity Winning Edge, Inc. Statement of Stockholders’ Equity For Year Ended December 31, 2006 Capital Stock: $10.00 Par Value January 1, 2006, 10,000 Shares Issued 100,000.00 Issued during Current Year 2,000 Shares 20,000.00 Balance, December 31, 2006, 12,000 Shares Issued 120,000.00

  5. Retained Earnings Section of the Statement of Stockholders’ Equity • Net Income increases a corporation’s total capital. • Some may be retained by a corporation for business expansion. Some may be distributed as dividends to provide stockholders with a return on their investment. • Amounts used to prepare the statement are obtained from the income statement and balance sheet columns of the worksheet and from the income statement itself.

  6. Retained Earnings Section of the Statement of Stockholders’ Equity cont’d from earlier slide Winning Edge, Inc. Statement of Stockholders’ Equity For Year Ended December 31, 2006 Retained Earnings: Balance, January 1, 2006 56,375.00 Net Income after Federal Income Tax for 2006 163,707.54 Less Dividends Declared during 2006 40,000.00 Net Increase during 2006 123,707.54 Balance, December 31, 2006 180,082.54 Total Stockholders’ Equity, December 31, 2006 300,082.54

  7. Work Together p. 668 • Use the worksheet and income statement for Webster Corporation from Work Together on page 665. • Prepare a statement of stockholders’ equity for the current year. As of January 1, Webster Corporation had issued 9,000 shares of capital stock with a par value of $10.00 per share. During the fiscal year, the corporation issued 1,000 additional shares of capital stock. Save your work to complete Work Together on page 674.

  8. Webster Corporation Statement of Stockholders’ Equity For Year Ended December 31, 2006 Capital Stock: $10.00 Par Value January 1, 2006, 9,000 Shares Issued 90,000.00 Issued during Current Year, 1,000 Shares 10,000.00 Balance, December 31, 2006, 10,000 Shares Issued 100,000.00 Retained Earnings: Balance January 1, 2006 59,241.54 Net Income after Federal Income Tax 2006 245,584.37 Less Dividends Declared during 2006 10,800.00 Net Increase During 2006 234,784.37 Balance, December 31, 2006 294,025.91 Total Stockholders’ Equity December 31, 2006 394,025.91 Assignments

  9. Assignments • Complete Application 26-2 by hand. • Turn it in. • Move on to Section 3.

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