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I. STOCKHOLDERS' EQUITY
A. Stock Issuance
B. Sale of Treasury Stock
C. Donated Capital
D. Redemption of Corporation's Own Stock
II. TERMS
B. Stock Outstanding - Stock held by shareholders other than the corporation itself.
C. Par Value - Arbitrary monetary value assigned to shares of stock and is printed on the
stock certificate.
E. Legal Capital - The minimum contribution by shareholders that must remain in the
corporation to protect creditors.
F. Common Stock - When a corporation has only one class of stock, it is called Common
Stock.
H. Treasury Stock - Previously issued stock that is repurchased by the issuing corporation.
I. Dividends - Distribution of earnings to shareholders.
(1) Cash
(2) Property
(3) Stock
J. Stock Splits - Reduction of par value of common stock and the issuance of a
proportionate number of additional shares.
DR Cash
CR Common Stock
(# shares issued X par value per share)
DR Cash (Proceeds)
CR Common Stock (Total Par Value)
CR Additional Paid-In Capital (Proceeds - Total Par Value)
DR Cash (Proceeds)
CR Common Stock (Stated Value X #Shares Issued)
Viewed as a return of capital to the shareholders from whom the purchase was made.
Thus, it is a temporary reduction of stockholders' equity.
DR Cash (Proceeds)
DR/CR APIC - Treasury Stock (Difference between proceeds and original
cost)
CR Treasury Stock (Original Cost)
V. DIVIDENDS
1. Dividend Declaration
2. Important Dates
A. Declaration Date
Date on which the corporation announces its intention to pay a dividend on capital stock.
B. Date of Record
Date on which a stockholder must own one or more shares of stock in order to receive a
dividend.
C. Date of Payment
DR Dividends
CR Dividends Payable
(# Shares of outstanding Stock X Dividend per share)
DR Dividends Payable
CR Cash
4. STOCK DIVIDENDS
Result: Capitalization of earnings; transfer from Retained Earnings to Capital Stock Accounts.
5. STOCK SPLITS
Memo entry only, indicate the change in par value and the number of shares outstanding.