LOGOChapter 10 Shareholders’ Equity LOGOStock transaction vFour important stock transactions四种典型四种典型的股票交易的股票交易:§Sell the stocks 出售股票出售股票§Repurchase the stocks 回购股票回购股票§Retire the stocks 注销股票注销股票§Resell the stocks 回购股票的再次出售回购股票的再次出售 LOGOSell the stocks 出售股票出售股票vWhen the company sells stocks, both cash and shareholders’ equity are increased, then the company becomes larger 当公司出售股票当公司出售股票（发行新股）时，现金和股东权益均增加，公司规模即扩大（发行新股）时，现金和股东权益均增加，公司规模即扩大.vExp. Alta Vena Company issues 2,000 shares of common stocks having a par value of $1, for a total price of $8,000.vDr. Cash 8,000v Cr. Common stock 2,000v Additional contributed capital-common 6,000 LOGORepurchase the stocks 回回购股票股票vWhen the company buys back stocks, both cash and shareholders’ equity are decreased, then the company becomes smaller 当公司回购股票时，现金和股东权益均减少，公当公司回购股票时，现金和股东权益均减少，公司规模即缩小司规模即缩小.vExp. Alta Vena Company buys back 2,000 shares of its own common stocks for $9,000. (which it had originally sold for $8,000)vDr. Treasury stock 9,000v Cr. Cash 9,000vShares repurchased and not retired are referred to as treasury stock 被回购而未被注销的被回购而未被注销的股票被称为股票被称为“库存股库存股”. LOGORepurchase the stocksvOne contra equity account 股东权益的股东权益的备抵账户备抵账户:Treasury stock+- LOGORetire the stocks 注注销股票股票vIf repurchase price>par value 当回购价当回购价>面值面值时时 , debit the “common stock” and “additional contributed capital”, credit the “treasury stock”, then record the remaining amount as “retained earnings”.vIf repurchase price Par valuevDr. Treasury stock 9,000v Cr. Cash 9,000vDr. Common stock 2,000v Additional contributed capital-common 6,000v Retained earnings 1,000v Cr. Treasury stock 9,000 LOGOExample vExp. Alta Vena Company buys back 2,000 shares of its own $1 par value common stocks (which it had originally sold for $8,000) for $1,500 and retires the shares.vPar value=$2,000, Repurchase price=$1,500vRepurchase price < Par valuevDr. Treasury stock 1,500v Cr. Cash 1,500vDr. Common stock 2,000v Cr. Treasury stock 1,500v Additional contributed capital-common 500 LOGOResell the stocks 回回购股票的再次出售股票的再次出售vExp. Alta Vena Company buys back 2,000 shares of its own common stocks for $10,000 and then resells these shares to investors for $15,000.vDr. Treasury stock 10,000v Cr. Cash 10,000vDr. Cash 15,000v Cr. Treasury shares 10,000v Additional contributed capital-common 5,000 LOGOExercise vPrior to the transactions, Borner’s shareholders’ equity included the following:vOn Jan. 7, 2011, Borner repurchased 2 million shares at $5 per share and then retired the shares.vOn Aug. 2, 2011, Borner repurchased 4 million shares at $0.5 per share and then retired the shares.vOn Sep. 1, 2011, Borner repurchased 3 million shares at $6 per share and then resold the shares at $7 per share.Shareholders’ Equity($ in millions)Common stock, 100 million shares at $1 par$100Additional contributed capital$300 LOGOReserves & Retained earnings vReserves: it includes statutory reserves and voluntary reserves. 1.Statutory reserves: also called legal reserves, are created based on the requirements of the law 法定盈余公积：法律规法定盈余公积：法律规定必须统一提取的盈余公积定必须统一提取的盈余公积 .•Exp. In China, it requires that companies set aside 10% of their net income for the year as a “statutory reserve”.2.Voluntary reserves: the company sets aside a certain percentage of its net income according to its own wish 任意盈余公积：公司任意盈余公积：公司自行提取的盈余公积自行提取的盈余公积 . LOGOReserves & Retained earnings vRetained earnings: a company’s accumulated profits (or losses) less any distributions that have been made therefrom 未分配利润：公司进行了所有分配之后未分配利润：公司进行了所有分配之后的累积的净利润（或净损失）的累积的净利润（或净损失） . §Retained earnings=Profits (or Losses) – any distributions§Distributions: Statutory reserves, Voluntary reserves, or dividends. LOGOExample vMax Company had 2,000,000 of net income in 2011. According to the law, it requires that companies set aside 10% of their net income for the year as a “statutory reserve”. Max then set aside 5% of its net income as “voluntary reserve”. In that year, Max distributed 500,000 of cash dividends.vWhat is the amount of “retained earnings”?vRetained earnings =2,000,000-2,000,000×10%-2,000,000×5%-500,000=1,200,000 LOGOAccounting for retained earnings vTwo parts will be discussed in the following section:§Cash dividends 现金股利现金股利§Stock dividends 股票股利股票股利 LOGOCash dividendsvCash dividends: Companies plan to pay dividends to stockholders in cash.vUsually, we have three important dividend dates, which are 分配现金股利的三个重要日期分配现金股利的三个重要日期:1.The declaration date 股利宣告日股利宣告日 •We reduce retained earnings and record a liability (dividends payable)2.The record date 股权登记日股权登记日 •We make no journal entry.3.The payment date 股利支付日股利支付日 1.We reduce the liability account and cash account. LOGOExample vOn May 1, 2011, the directors of River Corp. declare a $0.75 per share dividend on River Corp.’s 650,000 outstanding common stocks. The dividend is payable May 25 to holders of record May 15.vMay 1 (the declaration date):vDr. Retained earnings 487,500v Cr. Dividends payable 487,500vMay 15 (the record date): No entry.vMay 25 (the payment date):vDr. Dividends payable 487,500v Cr. Cash 487,500 LOGOStock dividendsvStock dividends: the distribution of additional shares of stock to current shareholders of the corporation 股票股利股票股利:公司以增发新股的方式支付股利公司以增发新股的方式支付股利.vA stock dividend affects neither the assets nor the liabilities of the firm. 发放股票股利不会导致企业发放股票股利不会导致企业资产的减少或负债的增加资产的减少或负债的增加 §It’s not an actual distribution of the assets.§It’s not a promise to distribute those assets.vBecause each shareholder receives the same percentage increase in shares, shareholders’ percentage ownership of the firm remains unchanged.发放股票股利不会引起股东所持股票比例的发放股票股利不会引起股东所持股票比例的变化变化 LOGOExample vCraft declares and distributes a 10% common stock dividend (10 million shares) when the market value of the $1 par common stock is $12 per share.vDr. Retained earnings 120v Cr. Common stock 10v Additional contributed capital-common 110 LOGOExercise vPrepare the appropriate entries for the following events:vOn March 1, the board of directors declared a cash dividend of $1 per share on its 120 million outstanding shares, payable on April 3 to shareholders of record March 11.vA 10% common stock dividend (18 million shares) was declares and distributes when the market value of the $2 par common stock is $15 per share.vOn Dec. 1, the board of directors declared the 9.09% cash dividend on the $11 million preferred shares, payable on Dec. 23 to shareholders of record Dec. 11. LOGOBrief introduction of chapter 10v1) definition of shareholders’ equityv2) difference between the liability and equity.v3) two basic resources of shareholders’ equityv 1) invested capitalv 2) earned capitalv4) describe the components of shareholders’ equityv5) comprehensive incomev6) accounting for transaction with LOGONature of shareholders’ equityvShareholders’ equity is the residual interest in the assets of an entity after deducting all liabilities 所有者权益是企业资产扣除负债后所有者享有所有者权益是企业资产扣除负债后所有者享有的剩余权益的剩余权益. §Residual interest§Shareholders’ equity=Assets – Liabilities LOGOComponents of shareholders’ equityShareholders’ equityIssued share capital 已发行股本已发行股本 Stated capital(Par capital) 股本股本/实收资本实收资本 Additional contributed capital (share premium) 资本公积资本公积(股本溢价股本溢价)Retained earnings 未分未分配利润配利润 Reserves 盈余盈余公积公积 LOGOIssued share capitalvStated capital (par capital): this is referred to as face value per share. (paid-in capital)股本：每股的面值股本：每股的面值1.Common stock 普通股普通股•Also called ordinary share, it represent the residual ownership of the corporation.•Common stockholders control the management of the corporation. 控制公司的管控制公司的管理层（有决策权）理层（有决策权）2.Preferred stock 优先股优先股•Also called preference share•Preferred stockholders will get a fixed dividend 获取固定股利获取固定股利 before it distributes any amount to the common stockholders. LOGOIssued share capitalvAdditional contributed capital 资本公积资本公积§Also called paid-in capital in excess of par value, or capital surplus§This is the amount received on the issuance of shares that is the excess over the par value. 金额为发行价超出面值的部分金额为发行价超出面值的部分 LOGOExample vLCD corporation issued 100,000 common shares with a par value of $1 per share. The stock price is $3.5 per share.vWhat is the amount of “stated capital”?vWhat is the amount of “additional contributed capital”?vStated capital=$1×100,000=$100,000vOr common stock=$100,000vAdditional contributed capital =($3.5-$1)×100,000=$250,000 LOGOAccounting for issuance of sharesvFour parts will be discussed in the following section:§Shares issued for cash 发行股票获取现金发行股票获取现金§Shares issued for non-cash assets 发行股发行股票获取非现金资产票获取非现金资产§More than one security issued for a single price 以一个价格发行一种以上证券以一个价格发行一种以上证券 §Share issue costs 股票发行费用股票发行费用 LOGOIssued for cashvExample: Dow industrial sells 100,000 of its common shares, $1 par per share, for $10 per share.▪Stated capital (common stocks) =100,000×$1=$100,000▪Additional contributed capital =($10-$1)×100,000=$900,000▪Dr. Cash 1,000,000▪ Cr. Common stock 100,000▪ Additional contributed capital-common 900,000 LOGOExercisevP459 E10-4 LOGOIssued for non-cash assetsvIf the shares are issued in exchange for non-cash assets, the transaction should be reflected at the fair value of the assets received 如果通过发行股票换取了非现金如果通过发行股票换取了非现金资产，那么换取的资产以公允价值计价资产，那么换取的资产以公允价值计价.vIf the fair value of the asset received is unknown, then the transaction should be recorded at the fair value of the shares issued. 如果换取的资产的公允价值未知，则该资产如果换取的资产的公允价值未知，则该资产以发行股票的公允价值计价。
以发行股票的公允价值计价 LOGOExamplevDuMont Chemicals issues 1 million of its common shares, $1 par per share, in exchange for an equipment with a market price of $6 million.sFair value of the asset=$6 millionsStated capital (common stocks) =$1×1 million shares=$1 millionsAdditional contributed capital =$6-$1=$5 million▪Dr. Equipment 6▪ Cr. Common stock 1▪ Additional contributed capital-common 5 LOGOExamplevDuMont Chemicals issues 1 million of its common shares, $1 par per share, in exchange for an equipment for which no market price is available. Today’s stock price is $10 per share.sFair value of the asset is unknown. sFair value the stocks=$10×1=$10 millionsStated capital (common stocks) =$1×1 million shares=$1 millionsAdditional contributed capital =$10-$1=$9 million▪Dr. Equipment 10▪ Cr. Common stock 1▪ Additional contributed capital-common 9 LOGOMore than one security issued for a single pricevSometimes, a company might sell common shares and preferred shares for a single price 有时，公司以一揽子价格同时发行普通股和优先股有时，公司以一揽子价格同时发行普通股和优先股.§Total selling price=common shares’ value + preferred shares’ valuevIf only one security’s value is known, then:§The second security’s market value=total selling price – the first security’s value§如果其中一种股票的价值已知，则另一种股票的价值如果其中一种股票的价值已知，则另一种股票的价值=发发行总价行总价 – 前一种股票的价值前一种股票的价值 LOGOExample vP434 Illustration 10-4sPar value of common stocks=$1×4=$4 millionsPar value of preferred stocks=$10×4=$40 millionsTotal selling price=$100 millionsCommon stock’s value=$10×4=$40 millionsPreferred stock’s value is unknown. sPreferred stock’s value=$100-$40=$60 millionsDr. Cash 100s Cr. Common stock 4s Additional contributed capital—common 36s Preferred stock 40s Additional contributed capital—preferred 20 LOGOExercisevP459 E10-5 LOGOShare issue costsvShare issue costs reduce the net cash received from selling the shares and also reduce “additional contributed capital” 股票发股票发行费用的产生将减少发行股票获取的净现金收入和资本公积行费用的产生将减少发行股票获取的净现金收入和资本公积的金额的金额.§Net cash=total selling price – share issue costs§净现金收入净现金收入=发行总价发行总价 – 股票发行费用股票发行费用§Additional contributed capital=Net cash – stated capital§资本公积资本公积=净现金收入净现金收入 – 股本股本 LOGOShare issue costsvExample: Dow industrial sells 100,000 of its common shares, $1 par per share, for $10 per share. The company should pay 3% of total selling price as share issue costs.▪Net cash=$10×100,000×(1-3%)=970,000▪Additional contributed capital =$970,000-$100,000=$870,000▪Dr. Cash 970,000▪ Cr. Common stock 100,000▪ Additional contributed capital-common 870,000 LOGOExercisevP459 E10-7 LOGO 。