Monday, March 1st, 1999
Announcements: none

Lecture notes:

1. A corporation is a body of persons granted a charter legally recognizing them as a separate entity having its own rights, privileges, and liabilities distinct from those of its members. To be formed, incorporators must file an application with the proper state official.
2. The board of directors determines the major business policies of the corporation and appoints managers to carry them out.

4. Separate Legal Entity--has legal rights
   Limited Liability--responsible for its actions and liabilities
   Ease of Capital Generation--easy to raise money
   Ease of Transfer of Ownership--easy to buy and sell stock
   Lack of Mutual Agency--one person can't make decisions for all
   Continuous Existence--can exist without the owner
   Centralized Authority and Responsibility--president in charge
   Professional Management--separate
5. Government Regulation--must meet state laws
   Taxation--double taxation
   Limited Liability--restricts borrowing of money
   Separation of Ownership and Control--management's decisions may be bad

9. a) date dividend is formally declared
   b) date the right to receive a dividend is determined
   c) date the dividend is paid to the stockholders
10. Cash dividends are declared, then a date of record determines who receives them, and finally they are paid to those stockholders.

14. Treasury stock is capital stock that has been issued and reacquired by the issuing company and has not been subsequently been resold or retired. It may be done to increase earnings per share, prevent takeover, or have more stock to distribute.

4.

5/15	Dividends			7,000
		Dividends Payable			7,000
6/15	Dividends Payable			7,000
			Cash		7,000

5.

19X1 = none

Preferred = 0

Common = 0

Preferred Stock in Arrears = $8,000

19X2 = $20,000

Preferred = $16,000

Common = $4,000

19X3 = $40,000

Preferred = $8,000

Common = $32,000

8.

10/5	Treasury Stock				20
				Cash		20
10/17	Cash				6,250
			Treasury Stock			5
			PIC (TS)			6,245
10/21	Cash				7,200
		Treasury Stock				8
		PIC (TS)				7,192

2.

Stockholder's Equity
Contributed Capital		600,000
Common Stock	360,000
PICE (PV), Common	170,000
- Treasury Stock	- 55,000
Total Contributed Capital	1,075,000
Retained Earnings		23,000
Total Stockholder's Equity		$1,098,000

3.

1) P	4) P	7) C
2) C	5) C	8) P
3) P	6) P	9) P

8.

1)	19X1 = $40,000	19X2 = $120,000
	Preferred = $40,000	Preferred = $60,000
	Common = 0	Common = $60,000
	19X3 = $140,000	19X4 = $90,000
	Preferred = $60,000	Preferred = $60,000
	Common = $80,000	Common = $30,000
2)	19X1 = $40,000	19X2 = $120,000
	Preferred = $35,000	Preferred = $35,000
	Common = $5,000	Common = $85,000
	19X3 = $140,000	19X4 = $90,000
	Preferred = $35,000	Preferred = $35,000
	Common = $105,000	Common = $55,000

9

1)	Cash		250,000
		Common Stock		250,000
2)	Cash		250,000
		Common Stock		100,000
		PICE (PV)		150,000
3)	Cash		250,000
		Common Stock		250,000
4)	Cash		250,000
		Common Stock		10,000
		PICE (PV)		240,000

12.

1)	Land		30,000
		Common Stock		20,000
		PICE (PV)		10,000
2)	Same as #1

Chapter 13 Homework

1. Retained earnings are the part of SE that represents claims to assets arising from the earnings of the business. When RE increases, assets increase.
2. When dividends and subsequent losses are greater then its accumulated profits form operation.

4. Stock dividends do not decrease SE and assets as cash dividends do.

8. Maybe--it depends on how much the stock is worth.

2.

2/15	Dividends			33,000
			Dividends Payable		33,000
3/1	NONE
3/15	Dividends Payable			33,000
		Cash			33,000
3/30	Dividends			55,000
		Dividends Payable			55,000

3.

Stockholder's Equity
Contributed Capital
Common Stock	2,250,000
PICE (PV)	6,000,000
Contributed Capital		8,250,000
Retained Earnings		6,500,000
Stockholder's Equity		$14,750,000

7.

Common Stock = 1,241,000 - (112 x 500) = 29.625

Preferred Stock = (104 x 500) + (100 x 500 x 8%) = 112