Equity Financing – Module

　　Capital Stock 股本

　　Preferred Stock 優(yōu)先股

　　Common Stock 普通股

　　Paid-in capital 實(shí)收資本

　　On May 1, Hydro-Slide Inc., issues 10 shares

　　of common stock for 5 per share.

　　On May 1, Hydro-Slide Inc., issues 10 shares

　　of 2 par value common stock for 5 per share.

　　On March 8, XYZ Company issued 5,000 shares of

　　its 10 par value common stock for 14 per share.

　　On November 17, XYZ Company issued 3,000 shares of

　　its 100 par value preferred stock for 112 per share.

　　Question: What is the difference between

　　issued and outstanding shares?

　　Answer: The difference between issued

　　outstanding shares represents

　　shares of stock issued by the

　　company and then reacquired by

　　the company (i.e., the company

　　buys back the stock).

　　treasury stock 庫(kù)存股

　　Why would a corporation reacquire its own stock?

　　– To reduce the shares outstanding and thus

　　increase the market value per share.

　　– Because the market price is low.

　　– To remove shares from the market to avoid a

　　hostile takeover.

　　– To use in employee stock option programs.

　　– To give cash back to existing shareholders.

　　– To increase the reported earnings per share.

　　The Angelfish Corporation reacquired

　　8,000 of the common shares issued on

　　January 21 for 20 per share. Record the

　　transaction.

　　Question: What happens when the shares that were

　　reacquired are re-issued?

　　Answer: The accounting treatment depends on the

　　relationship between the re-issue price

　　and the reacquisition cost.

　　The Angelfish Corporation re-issued 2,500

　　of the treasury shares for 22 per share.

　　Record the transaction. Note the re-issue

　　price (22) > reacquisition cost (20).

　　The Angelfish Corporation re-issued 3,000

　　of the treasury shares for 16 per share.

　　Record the transaction. Note the re-issue

　　price (16) < reacquisition cost (20).

　　Date of Declaration

　　Date of Payment

　　Investments – Module

　　On August 17, 2004, XYZ Company purchased

　　20,000 shares of ATT stock for

　　500,000 (25 per share).

　　Prepare the journal entry to record the

　　purchase of the investment.

　　On November 1, 2004, XYZ Company received

　　4,000 of dividends relating to this investment.

　　Prepare the journal entry to record the

　　receipt of the dividends.

　　On November 28, 2004 XYZ sold 12,000

　　of these shares for 315,000.

　　Prepare the journal entry to record

　　the sale of the 12,000 shares.

　　On December 31, 2004 the market value of the

　　remaining shares was 240,000 (30 per share).

　　Prepare the mark-to-market

　　adjusting journal entry.

　　Cost of remaining shares = 8,000 shares x 25 = 200,000

　　Market value = 240,000

　　Unrealized gain = 40,000

　　On May 18, , XYZ sold 4,000 shares

　　of the remaining shares for 90,000 .

　　Prepare the journal entry to record

　　the sale of the 4,000 shares.

　　On December 31, the market value of the

　　remaining shares was 95,000 (23.75 per share).

　　Prepare the mark-to-market

　　adjusting journal entry.

　　Investments on balance sheet = 4,000 x 30 = 120,000

　　Market value = 95,000

　　Unrealized loss = 25,000

　　On June 8, 2007, ABC Company declared and

　　paid a cash dividend of 100,000.

　　Prepare the journal entry to record the

　　receipt of the dividends.

　　For 2007, ABC Company reported net income

　　of 200,000.

　　Prepare the journal entry related to the

　　net income.

　　On December 31, 2007, XYZ Company sold its

　　investment in ABC Company for 520,000 cash.

　　Prepare the journal entry to record

　　the sale of the ABC Company stock.

　　Property-Plant-Equipment – Module

　　To Record Depreciation Expense (done each year as an

　　adjusting entry):

　　Debit

　　Depreciation Expense

　　Credit

　　Accumulated Depreciation