Reporting and Analyzing Stockholders’ Equity
Study Objective 1 - Identify and Discuss the Major Characteristics of a
Corporations can be classified two ways:
♦ Characteristics distinguishing corporations from proprietorships and
Study Objective 2 - Record the Issuance of Common Stock
♦ Forming a corporation
States grant corporate charters.
Although a corporation may have operating divisions in a number of states,
it will be incorporated in__________________________.
♦ Stockholder rights
When a corporation has only one class of stock it is common stock.
Ownership rights are specified in
Authorized stock –
♦ Issuance of stock
A corporation has the option of issuing common stock directly to investors
or indirectly through an investment banking firm that specializes in
bringing securities to the attention of prospective investors.
_________________ issue is typical in closely held companies.
_________________issue is customary for publicly held companies.
♦ Par and no-par value stocks
Par value stock is capital stock that has been assigned a value per share in
the corporate charter.
Par value represents the ______________________per share that must be
retained in the business for the protection of corporate creditors. It is the
amount that is not available for withdrawal by stockholders.
No-Par value stock-
Stated value, like par value, does not indicate or correspond to the
market value of the stock.
♦ Accounting for common stock issues
The stockholders’ equity section of a corporation’s balance sheet includes:
(1) paid-in (contributed) capital and (2) retained earnings (earned
1. ____________________________is the amount paid in to the corporation
by stockholders in exchange for shares of ownership.