Week 14 Prepare for the week:

15-Apr Chapter 10: Read pages 490 – 504 and 512 - 515
17-Apr WATCH the chapter 10 videos
19-Apr In class
Chapter 10: Stockholders’ Equity (Invested capital and SE section on BSSSE)
Due this week
VLN 10 due by 4/17 at 11:59 PM
Chapter 10 Guided Practice (in CONNECT) due by 4/17 at 11:59 PM
Class Problem (CP10) submitted in Canvas due by 4/19 at 11:59 PM
Chapter 10 homework due by 4/20 at 11:59 PM
Use the McGrawHill extra practice problems, for review

QUIZ 3 (chapters 8-10, TVM) 15 points (50-minutes)

Opens April 21, at 12:00AM; Due and closes April 24 at 11:59PM
Week 15 Prepare for the week:
22-Apr Review topics for final exam
24-Apr Students bring questions you have related to the final exam
26-Apr In class
Respond to student questions related to chapters 8, TVM, 9, 10 and other final exam topics.
Due this week
Class Problem (CP8-10) submitted in Canvas due by 4/24 at 11:59 PM
Continue preparing for the final exam
*LO3 Assessment Quiz due in Canvas by 4/29 at 11:59PM (10 points)
Finals FINAL EXAM (chapters 8-10, TVM, 1-7) 300 points (160 pts multiple
choice, 140 pts homework type) (2-hour exam)
May 3rd: CRN 11002 Friday 10:00 AM
May 1st: CRN 11003 Wednesday 12:30 PM
May 4th: CRN 11004 Saturday 12:30 PM
May 3rd: CRN 11005 Friday at 12:30 PM
*LO3 Be able to record, analyze and report reliable and relevant financial statement information.

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Par value is an outdated concept but still exists, so we have to account for it.
Par value dollar amount goes into the stock account (Common Stock or Preferred Stock)…
anything above par value goes into Additional Paid in Capital (APIC).
**outstanding shares are the shares of stock that are not in the corporation hands
**only outstanding shares gets dividends and get to vote
**Treasury stock is stock that was bought back
Preferred stock account = Par value x shares issued
+Common stock account = Par value x shares issued
+Additional Paid in Capital account = amount above par value
Total Paid in Capital (total amount company received from stocked issued)

Paid in Capital represents the amount the owners invested into the company. Company sells
1,000 shares of common stock for $18 per share. Paid in Capital increases by $18,000.
Assume par value of $0.01
Record the issuance.
Common stock would get $10 ($0.01 x 1000 shares) of the $18,000 and the APIC would get
$17,990 (the rest, $18,000 - $10)

Cash 18,000
Common Stock 10
APIC 17,990
bottom two are beige
Assume no par value:
Common stock would get all $18,000 (just like we did in the early chapters). And Legal Capital
would be stipulated by the state in which the company was incorporated.

cash 18,0000
common stock 18,000

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Company sells 1,000 shares of preferred stock for $101 per share, par value $100. Paid in
Capital increases by $101,000.

Preferred stock would get $100,000 ($100 x 1000 shares) of the $101,000 and the APIC would
get $1,000 (the rest, $101,000 - $100,000)
cash 101,000
Preferred stock 100,000
APIC 1,000

$100 par value $0.01 par value Additional Total

Preferred Stock Common Stock Paid-in Capital Paid in Capital
Issuance $100,000 $10 $18,990 $119,000

1. Who owns a corporation:

A. President/CEO
B. Board of Directors
C. Stockholders
D. CEO and CFO

2. The company has 1,000,000 authorized shares of which 200,000 have been issued and
10,000 shares are being held as treasury stock. How many shares are outstanding?
A. 800,000 shares
B. 190,000 shares
C. 210,000 shares
D. 790,000 shares

3. The company issues 1,000 shares of their $0.10 par value common stock for $15 per share.
Which would be included in the correct journal entry:
1,000 shares x $0.10 = $100 1,000 shares x $15 = $15,000
A. Credit Common stock for $15,000
B. Credit Additional Paid in Capital for $15,000
C. Credit Additional Paid in Capital for $100
D. Credit Common Stock for $100

cash 15,000
common stock 100
APIC 14,900

4. The company’s Common Stock account balance is $5,000. Their common stock has a par
value of $0.01. The company has 20 shares of treasury stock. How many shares of stock has
the company issued?
A. 500,000 shares
B. 499,980 shares
C. 50 shares
D. 30 shares
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Page 4
 How many shares do they have outstanding?
A. 500,000 shares
B. 499,980 shares
C. 50 shares
D. 30 shares

Treasury stock (contra equity)

5. The company purchased 5,000 shares of its common stock for $10 per share. Record the
purchase. Which account should be debited? Which account should be credited?
A. Treasury stock
B. APIC
C. Common stock
D. Cash

Treasury stock 50,000

cash 50,000

What happened to the ____(accounts to choose from: common stock, APIC, Retained earnings,
Stockholders’ Equity) account when the treasury stock was purchased?
A. Increased
B. Decreased
C. No effect

Later the company sold 1,000 shares of its treasury stock for $15 per share.
Treasury stock is recorded at cost. What does that mean?
A. The company paid $15,000 for the Treasury Stock.
B. The company recorded Additional Paid in Capital of $10,000 when they reissued the
stock.
C. The company recorded Additional Paid in Capital of $15,000 when they reissued the
stock.
D. The company reduced the Treasury Stock account for $10,000 when they reissued the
stock.

Cash (A+) 15000

APIC 5000
Treasury stock (XE- SE+) 10000

1,000 treasury shares are sold for $6.00 per share, record the sale:
Cash (A+)

Treasury stock (XE- SE+)

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6. Treasury stock causes
A. the retained earnings account to decrease.
B. issued stock to decrease.
C. total stockholders’ equity to decrease.
D. the common stock account to decrease.

7. When Treasury Stock is sold it always causes

A. Common stock to increase.
B. Total stockholder’s equity to increase.
C. Cash to decrease.
D. Number of shares issued to increase.

REMEMBER
Preferred stock account = Par value x shares issued
+Common stock account = Par value x shares issued
+Additional Paid in Capital account = amount above par value
Total Paid in Capital (total amount company received from stocked issued)

OR: Paid in capital = total from PS (PS+APIC) + total from CS (CS+APIC)

Practice (problems similar to homework)

Page 6
 The Company.
Balance Sheet (Stockholders’ Equity Section)
At March 31, 2022

Preferred stock, $100 par value $100,000 /100 per share= 1000 shares
Common stock, $0.05 par value 12,000 /0.05 per share= 240,000 shares
Additional Paid in capital ?
Total paid in capital 2,501,000 -101,000= 2,400,000
Retained earnings 945,000
Treasury stock (20,000 common shares) (360,000)/ 20,000 shares = 18
2,501,000 + 945,000 - 360,000=
Total stockholders' equity ? 3,086,000

1. How many shares of preferred stock were 4. The preferred stock was issued for $101 per
issued? share, how much was the common stock was sold
A. 10,000,000 shares for? $__ per share.
B. 1,000 shares A. $0.05
C. 100,000 shares B. $600
D. Cannot be determined C. $10 = 2,400,000/240,000= 10
D. $15
2. How many shares of common stock were 5. Total Stockholders’ Equity is:
issued? A. $3,806,000
A. 240,000 shares B. $3,446,000
B. 600 shares C. $3,198,000
C. 12,000 shares D. $3,086,000
D. Cannot be determined

3. How many shares of common stock are 6. What was the average cost of the Treasury
outstanding? Stock?
A. 260,000 shares A. $10.00
B. 220,000 shares B. $18.00
C. 80,000 shares C. $30.00
D. 100,000 shares D. $11.10

7. If the Company sold 1,000 shares of Treasury Stock for $15, how would that affect
Stockholders’ Equity?
A. It would decrease.
B. It would increase. 15,000
C. It would have no effect on Stockholders’ Equity.
D. Cannot be determined.

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Management is considering either a 25% stock dividend or a 5-for-4 stock split.
Complete the following chart to assist in answering the following:
After 25% After 5-for-4
Before Stock Dividend Stock Split
+ 31,250=
Common stock, $0.50 par $125,000 156,250 125,0000
Additional paid-in capital 2,625,000 2,625,000 2,625,0000
Total paid-in capital 2,750,000 2,781,250 2,750,000
- 31,250=
Retained Earnings 1,425,300 1,394,050 1,425,300
Total stockholders’ equity $4,175,300 4,175,300 4,175,300

*.25= 62,500=
Shares outstanding 250,000 312,500 *5/4 =312,500
Par value per share $0.50 0.50 *4/5 = 0.40
Share price $110.00 /1.25 = 88.00 * 4/5 = 88.00

After the 25% stock dividend what amount is in Total paid-in capital account? 2,781,250
After the 25% stock dividend what amount is in the retained earnings account? 1,394,050
After the 25% stock dividend what is the par value per share? 0.50
After the 5-for-4 stock split what amount is in Total paid in capital account? 2,750,000
After the 5-for-4 stock split what is the par value per share? 0.40
Is a stock dividend and a cash dividend the same thing? Y/N no
Is a stock dividend a dividend? Y/N yes
Is a stock split a dividend? Y/N no

What do dividends do to retained earnings?

A. Increase it
B. Decrease it
C. Does not affect it
D. Cannot be determined

Do all dividends decrease stockholders’ Equity? Y/N no

Which of the following is NOT reflected in Stockholders’ Equity?

A. Treasury stock
B. Dividends
C. Stock splits
D. Additional Paid in Capital

Page 8
F, Inc., has two classes of stock authorized: $100.00 par preferred and $0.01 par value common.
As of the beginning of 20XD, 1,500 shares of preferred stock and 500,000 shares of common
stock have been issued.
Record the following transactions to complete the Statement of Stockholders’ Equity:
Effect on Stockholders’ Equity
Issue 500 additional shares of
1-Mar
preferred stock for $125 per share
Issue 100,000 additional shares of
1-Apr
common stock for $10 per share
Declare a cash dividend on both
common and preferred stock of
1-Jun
$0.40 per share to all stockholders
of record on June 15.
Pay the cash dividend declared on
30-Jun
June 1.
Repurchase 50,000 shares of
1-Aug common treasury stock for $9 per
share
Reissue 40,000 shares of treasury
1-Oct stock purchased on August 1 for
$11.00 per share
Net income for the year was
31-Dec
$335,000.
The beginning balances are shown below.
Additional Total
Preferred Common Paid-in Retained Treasury Stockholders'
Stock Stock Capital Earnings Stock Equity
Beginning balance $150,000 $5,000 $2,300,000 $500,000 $0 $2,955,000
Issuance of stock
Net income
Less: Dividends
Purchase of Treasury
Sale of Treasury
Ending balance 20XC

Page 9
The firm was authorized to issue 500,000,000 shares of $0.10 par common stock. During the
first year the company had the following transactions relating to shareholders' equity:

Per share Shares Total

Issued common stock (January) $11.00 1,000,000
Issued common stock (July) $12.50 500,000
Outstanding shares 1,400,000
Dividends declared $0.70
Treasury stock $14.00
Net income for the year $1,870,000

What is total Paid-in capital at the end of the first year?

What is the additional paid-in capital at the end of the first year?
$0.10 par value Additional Total
Common Stock Paid-in Capital Paid in Capital
Issuance JAN
Issuance JULY

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