Corporations: Organization, Capital Stock Transactions, and Dividends Chapter 12 Corporations: Organization, Capital Stock Transactions, and Dividends Accounting, 21st Edition Warren Reeve Fess © Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc. PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University

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After studying this chapter, you should be able to: Objectives 1. Describe the nature of the corporate form of organization. 2. List the two main sources of stockholders’ equity. 3. List the major sources of paid-in capital, including the various classes of stock. 4. Journalize the entries for issuing stock. 5. Journalize the entries for treasury stock transactions. After studying this chapter, you should be able to:

Objectives 6. State the effect of stock splits on corporate financial statements. 7. Journalize the entries for cash dividends and stock dividends. 8. Describe and illustrate the reporting of stockholders’ equity. 9. Compute and interpret the dividend yield on common stock.

Organizational Structure of a Corporation Stockholders (owners of corporation stock) Board of Directors (elected by stockholders) Officers (selected by board of directors) Employees

Forming a Corporation First step is to file an application of incorporation with the state. Because state laws differ, corporations often organize in states with more favorable laws. More than half of the largest companies are incorporated in Delaware. State grants a charter or articles of incorporation which formally create the corporation. Management and board of directors prepare bylaws which are operation rules and procedures.

Forming a Corporation On January 5, the firm paid the organization costs of $8,500. This amount includes legal fees, taxes and licenses, promotion costs, etc. Jan. 5 Organization Expense 8 500 00 Cash 8 500 00 Paid cost of organizing the corporation.

Stockholders’ Equity = Assets – Liabilities Represents the stockholders’ share of the total assets.

There are two sources of stockholders’ equity. Liabilities There are two sources of stockholders’ equity. Assets Stockholders’ Equity Stockholders’ Equity

Stockholders’ Equity Liabilities Assets Stockholders’ Equity 1 Stockholders’ Equity: Paid-in capital: Common stock $xxxxx Retained earnings xxxx Total $xxxxx Stockholder investments

Stockholders’ Equity Liabilities Assets Stockholders’ Equity Paid-in capital: Common stock $xxxxx Retained earnings xxxx Total $xxxxx 2 Reinvested earnings

Sources of Paid-In Capital Authorized Issued Outstanding Number of Shares

Major Rights that Accompany Ownership of a Share of Stock Sources of Paid-In Capital Major Rights that Accompany Ownership of a Share of Stock 1. The right to vote in matters concerning the corporation. 2. The right to share in distribution of earnings. 3. The right to share in assets on liquidation.

Classes of Stockholders The two primary classes of paid-in capital are common stock and preferred stock. The primary attractiveness of preferred stocks is that they are preferred over common as to dividends. Money available for dividends Common Stockholders Preferred Stockholders

Classes of Stockholders Common Stock—the basic ownership of stock with rights to vote in election of directors, share in distribution of earnings, and purchase additional shares. Preferred Stock—A class of stock with preferential rights over common stock in payment of dividends and company liquidation.

Nonparticipating Preferred Stock A nonparticipating preferred stock is limited to a certain amount. Assume 1,000 shares of $4 nonparticipating preferred stock and 4,000 shares of common stock and the following: Net income $20,000 $55,000 $62,000 Amount retained 10,000 20,000 40,000 Amount distributed $10,000 $35,000 $22,000 2005 2006 2007

Nonparticipating Preferred Stock Amount distributed $10,000 $35,000 $22,000 Preferred dividend (1,000 shares) 4,000 4,000 4,000 Common dividend (4,000 shares) $6,000 $31,000 $18,000 Dividends per share: Preferred $ 4.00 $ 4.00 $ 4.00 Common $ 1.50 $ 7.75 $ 4.50

Cumulative Preferred Stock So, preferred dividends are two years in arrears. Assume 1,000 shares of $4 cumulative preferred stock and 4,000 shares of common stock. No dividends were paid in 2005 and 2006.

Cumulative Preferred Stock On March 7, 2007, the board of directors declares dividends of $22,000.

Cumulative Preferred Stock Preferred Stock Dividends Dividends Paid in 2007 Total dividends paid, $22,000 $4,000 2005 (In arrears) $4,000 $10,000 $4,000 2006 (In arrears) $4,000 $4,000 2007 (Current dividend) $4,000 Preferred Stock Common Stock

Other Sources of Paid-in Capital On April 20 the city of Moraine donated land to Merrick Corporation as an incentive to relocate its headquarters to Moraine. The land was valued at $500,000. Apr. 20 Land 500 000 00 Donated Capital 500 000 00 Recorded land donated by the city of Moraine.

ISSUING STOCK Penerbitan /Penjualan Saham Dijual tunai Dijual dengan pembayaran bertahap Ditukar dengan Aktiva non cash Ditukar dengan perusahaan ( dalam penggabungan usaha

Penerbitan Saham PT ABC Saham

Tgl Account Debit Kredit April 1 Pada tanggal 1 April 2002 PT. A menjual 4.000 lembar saham nominal $1/lb dengan harga $45,000 PT A Saham $1 $45,000 Kas bertambah $ 45,000 Saham yang beredar bertambah $ 4,000 Agio Saham bertambah $ 41,000 Tgl Account Debit Kredit April 1 Cash $ 45,000 Common Stock $ 4,000 Paid In Capital - C/S $ 41,000

Tgl Account Debit Kredit April 1 Pada tanggal 1 April 2002 PT. A menjual 4.000 lembar saham nominal $1/lb dengan harga $4,000 PT A Saham $1 $4,000 Kas bertambah $ 4,000 Saham yang beredar bertambah $ 4,000 Tgl Account Debit Kredit April 1 Cash $ 4,000 Common Stock $ 4,000

Tgl Account Debit Kredit April 1 Pada tanggal 1 April 2002 PT. A menjual 4.000 lembar saham nominal $1/lb dengan harga $3,600 PT A Saham $1 $3,600 Kas bertambah $ 3,600 Memberi discount $ 400 Saham yang beredar bertambah $ 4,000 Tgl Account Debit Kredit April 1 Cash $ 3,600 PIC-C/S or R/E $ 400 Common Stock $ 4,000

Tgl Account Debit Kredit April 1 Pada tanggal 1 April 2002 PT. A menjual 4.000 lembar saham tanpa nominal dengan harga $45,000 PT A Saham $45,000 Kas bertambah $ 45,000 Saham yang beredar bertambah $ ? Tgl Account Debit Kredit April 1 Cash $ 45,000 Common Stock $ 45,000

Common Stock Subscribed 5,000 PIC 57,500 Pada tanggal 1 November 2002 PT. A menerima order / pesanan 5.000 lembar saham nominal $1 per lembar dengan harga $12.5/lembar. Saat itu diterima down Payment 50 %. Tgl Account Debit Kredit 2002 Nov.1 Stock Subcription Rec $62,500 Common Stock Subscribed 5,000 PIC 57,500 Cash 31,250 Stock SubcriptionReceivable

Stock Subscription Rec. Pada tanggal 1 Desember 2002 PT. A menerima sisa harga untuk 2.500 lembar. Selanjutnya diserahkan 2,500 lembar saham ke pemesan. Tgl Account Debit Kredit 2002 Des. 1 Cash 15,625 Stock Subscription Rec. Common Stock Subscribed 2,500 Common stock

Bagaimana jika ada yang gagal membayar Seluruh uang yang diterima dikembalikan Seluruh uang yang diterima tidak dikembalikan, melainkan dianggap kedaluarsa Uang yang diterima dikembalikan setelah dikurangi dengan jumlah tertentu Pemesan saham diberikan saham sesuai dengan yang telah dibayar.

Tgl Account Debit Kredit 2002 Land 10,000 Common Stock 100 PIC-C/S 200 lembar saham biasa nominal $0.5/lembar ditukar dengan tanah. Saham perusahaan diperdagangkan di bursa dengan harga $50 Saham (200 lb, $0.5/lb, Hg pasar $50/lb) Perusa- haan Tanah Tgl Account Debit Kredit 2002 Land 10,000 Common Stock 100 PIC-C/S 9,900

Tgl Account Debit Kredit 2002 Land 12,000 Common Stock 100 PIC-C/S 200 lembar saham biasa nominal $0.5/lembar ditukar dengan tanah. Saham perusahaan tidak diperdagangkan di bursa sementara itu harga pasar tanah lebih dapat dipercaya yaitu $12,000 Saham (200 lb, $.5/lb) Perusa- haan Tanah =$12,000 Tgl Account Debit Kredit 2002 Land 12,000 Common Stock 100 PIC-C/S 11,900

Tgl Account Debit Kredit 2002 Salaries Expense 5,000 Common Stock 50 100 lembar saham biasa nominal $.5/lembar diserahkan ke salah satu karyawan sebagai pembayaran gaji. Saham perusahaan diperdagangkan di bursa dengan harga $50/lembar. Tgl Account Debit Kredit 2002 Salaries Expense 5,000 Common Stock 50 PIC-C/S 4,950

Issuing Stock at No-Par Some states require that the entire proceeds from the sale of no-par stock be treated as legal capital.

Issuing Stock at No-Par Also, no-par stock may be assigned a stated value per share. The stated value is recorded similar to a par value.

Issuing Stock with a Stated Value On March 30, issued 1,000 shares of no-par common stock at $40; stated value, $25. Mar. 30 Cash 40 000 00 Common Stock 25 000 00 Paid-in Capital in Excess of Stated Value 15 000 00 Issued 1,000 shares of no-par common stock at $36; stated value, $25.

Treasury Stock Saham Perusahaan yang pernah diterbitkan dan sekarang dibeli kembali oleh perusaaan PT. ABC Pemegang saham PT ABC Saham PT ABC Saham

PT. ABC Pemegang saham PT ABC Saham PT ABC Saham PT ABC Saham PT ABC Saham PT ABC Saham PT ABC Saham

Metode Pencatatan METODE COST METODE NILAI NOMINAL III-39 AKM-2 Ekuitas Metode Pencatatan METODE COST METODE NILAI NOMINAL Margono III-39

METODE COST 1. Pada saat dibeli, treasury stock dicatat sebesar cost 2. Pada saat treasury stock dijual bandingkan antara harga jual dengan costnya A. Harga jual = cost Selisihnya dicatat sebagai Agio/Paid In Capital B. Harga jual > cost Selisihnya mengurangi Agio dan laba ditahan B. Harga jual < cost

PT. ABC menerbitkan 10,000 lembar saham nominal $1 dengan harga jual $15 per lembar Kas bertambah 10.000x $15 = $150,000 Modal saham bertambah 10.000x$1 = $10.000 Timbul agio 10.000x ($15-$1) = $140,000 Account Debit Kredit Cash $150,000 Common Stock $ 10,000 Paid In Capital in Exess of Par $140,000 Agio/Premium= Paid In Capital in Exess of Par

PT. ABC membeli kembali 1,000 lembar saham dengan harga beli $40 per lembar Treasury stock bertambah 1.000x $40 = $40,000 Kas berkurang = $40.000 Account Debit Kredit Treasury Stock $ 40,000 Kas $ 40,000 Treasury Stok Cash 40,000 40,000

Paid In capital From T/S 2,000 PT. ABC menjual 200 lembar Treasury Stock dengan harga jual $50 per lembar Account Debit Kredit Cash 10,000 Treasury Stock 8,000 Paid In capital From T/S 2,000 Cost

PT. ABC menjual 500 lembar Treasury Stock dengan harga $34 /lb Kas bertambah = $17.000 Treasury stock berkurang 500 lembar $ 40 =$20,000 Menerima uang dari pemegang saham $3,000 lebih kecil Account Debit Kredit Kas $ 17,000 Paid In Capital- T/S $ 2,000 Retained earning $ 1,000 Treasury stock $ 20,000 Treasury Stok Cash 40,000 40,000 $ 8,000 $ 10,000 PIC-T/S $ 2,000

Paid In capital From T. Stock 2,000 PT. ABC menjual 500 lembar Treasury Stock dengan harga jual $34 per lembar Account Debit Kredit Cash 17,000 Paid In capital From T. Stock 2,000 Retained Earning 1,000 Treasury Stock 20,000

PT. ABC membatalkan 300 lembar Treasury Stock Account Debit Kredit Common Stock 300 Paid In capital in Excess of Par 4,200 Retained Earning 7,500 Treasury Stock 12,000

PT. ABC membatalkan 300 lembar Treasury Stock Account Debit Kredit Common Stock 300 PIC in Excess of Par-C/S 11,700 Treasury Stock 12,000 Cost

Stock Splits A corporation sometimes reduces the par or stated value of their common stock and issues a proportionate number of additional shares. This is called a stock split.

Stock Splits 20 shares, $20 par AFTER 5-1 STOCK SPLIT $400 total par value BEFORE STOCK SPLIT 4 shares, $100 par $400 total par value

Stock Splits A stock split does not change the balance of any corporation accounts. However, it can make the stock more attractive to investors by reducing the price of a share,

Accounting for Dividends Dividends are distributions of retained earnings to stockholders. Dividends may be paid in cash, stock, or property. Dividends, even on cumulative preferred stock, are never required, but once declared become a legal liability of the corporation.

Accounting for Cash Dividends Corporations generally declare and pay cash dividends on shares outstanding when three conditions exist: 1. Sufficient retained earnings 2. Sufficient cash 3. Formal action by the board of directors Retained Earnings 50,000

Accounting for Cash Dividends There are three important dates relating the dividends.

Accounting for Cash Dividends First is the date of declaration. Assume that on December 1, Hiber Corporation declares a $42,500 dividend.

Accounting for Cash Dividends Date of Declaration Dec. 1 Cash Dividends 42 500 00 Cash Dividend Payable 42 500 00 Declared cash dividend.

Accounting for Cash Dividends The second important date is the date of record. For Hiber Corporation this would be December 11.

Accounting for Cash Dividends The third important date is the date of payment. On January 2, Hiber issues dividend checks. 2

Accounting for Cash Dividends Date of Payment Jan. 2 Cash Dividends Payable 42 500 00 Cash 42 500 00 Paid cash dividends.

Accounting for Stock Dividends A distribution of dividends to stockholders in the form of the firm’s own shares is called a stock dividend.

Accounting for Stock Dividends Stock dividends transfer pro rata shares of stock to stockholders. Assume Hendrix Corporation issues a 5% stock dividend on common stock, $20 par, 2,000,000 shares issued.diketahui harga pasar saat ini adalah $31

Hendrix Corporation, December 15 (before dividend) Accounting for Stock Dividends Hendrix Corporation, December 15 (before dividend) Common Stock, $20 par $40,000,000 Paid-in Capital in Excess of Par--Common Stock 9,000,000 Retained Earnings 26,600,000 Dec. 15 Stock Dividends 3,100 000 00 Stock Dividends Distributable 2,000000 00 Paid-in Capital in Excess of Par—Common Stock 1,100000 00 Declared stock dividend.

Accounting for Stock Dividends On January 10, Hendix Corporation issues the stock. This action increases the number of shares outstanding by 100,000. Jan. 10 Stock Dividends Distributable 2,000 000 00 Common Stock 2,000000 00 Issued stocks for the stock dividend.

Accounting for Stock Dividends Hendrix Corporation, December 15 (before dividend) Common Stock, $20 par $40,000,000 Paid-in Capital in Excess of Par--Common Stock 9,000,000 Retained Earnings 26,600,000 $75,600,000 Hendrix Corporation, January 10 (after dividend) Common Stock, $20 par $42,000,000 Paid-in Capital in Excess of Par--Common Stock 10,100,000 Retained Earnings 23,500,000 $75,600,000

Financial Analysis and Interpretation Use: To indicate the rate of return to common stockholders in terms of dividends Dividend Yield 2004 2003 Dividends per share of common $ 0.80 $ 0.60 Market price per share of common $20.50 $13.50 Dividends per Share of Common Stock Market Price per Share of Common Stock Dividend Yield $.60 $13.50 Dividend Yield, 2006 = 4.4% Dividend Yield, 2007 $.80 $20.50 = 3.9%

There are two ways to report stockholders’ equity in the balance sheet There are two ways to report stockholders’ equity in the balance sheet. In Slide 58, each class of stock is listed first, followed by its related paid-in capital accounts.

Stockholders’ Equity Paid-in capital: Preferred 10% stock, $50 par, 61 Stockholders’ Equity Paid-in capital: Preferred 10% stock, $50 par, cumulative (2,000 shares authorized and issued) $100,000 Excess of issue price over par(PIC-P/S) 10,000 $ 110,000 Common stock, $20 par (50,000 shares authorized, 45,000 issued) $900,000 Excess of issue price over par(PIC C/S) 190,000 1,090,000 From sale of treasury stock 2,000 Total paid-in capital $1,202,000 Retained earnings 350,000 Total $1,552,000 Deduct treasury stock (600 shares at cost) 27,000 Total stockholders’ equity $1,525,000

Slide 60 shows the second method Slide 60 shows the second method. Note that the stock accounts are listed first. The other paid-in capital accounts are listed as a single item described as Additional paid-in capital.

Stockholders’ Equity Contributed capital: #Preferred 10% stock, cumulative $50 par (2,000 shares authorized and issued) $100,000 #Common stock, $20 par (50,000 shares authorized, 45,000 issued) 900,000 #Additional paid-in capital - PIC P/S 10,000 - PIC C/S 190,000 - PIC T/S 2,000 202,000 Total contributed capital $1,202,000 Retained earnings 350,000 Total $1,552,000 Deduct treasury stock (600 shares at cost) 27,000 Total stockholders’ equity $1,525,000

Chapter 12 The End

Stock Right, Warrant and Option Hak yang diberikan ke para pemegang saham untuk membeli saham baru Surat berharga yang dijual oleh perusahaan /yang melekat pada surat berharga lain yang memberi hak untuk membeli saham Warrant Opsi untuk membeli saham perusahaan dengan harga tertentu yang diberikan ke officer atau karyawan Opsi

Stock Right Tak perlu ada jurnal

Stock Warrant Detachable Warrant Non detachable Warrant Warrant yang dapat dipisahkan dengan surat berharga lainnya Warrant yang tak dapat dipisahkan dengan surat berharga lainnya Warrant dicatat tersendiri Warrant tak dicatat tersendiri

DetachableStock Warrant PT. B menjual 1.000 saham prefent nominal $50/lembar dengan harga $58/lembar. Pemegang saham Preferrent diberikan warrant untuk membeli 1,000 lembar saham biasa nominal $2/ lembar dengan harga $25/lembar. Segera setelah itu harga pasar Saham Preferrent tanpa warrant $57/lembar, sementara itu warrant diperjualbelikan dengan harga $3/lembar. Warrant S.P $50 $58 Harga saham Dialokasikan Harga Jual $58 Harga warrant Perbandingan Harga pasar saham dan warrant

Alokasi Harga Jual dan Jurnal Warrant= ( 3:60) x $58 = $2,900 Nominal =$ 50,000 Saham = ( 57:60) x $58 = $55,100 Agio = $ 5,100 Account Debit Kredit Cash 58,000 Preferreed Stock PIC in Excess of Par -PS Stock Warrant 50,000 5,100 2,900

Jika warrant diexercise=1.000 lembar $25, par $2/lembar Account Debit Kredit Cash 25,000 Common Stock Warrant Common Stock 2,900 2,000 PIC In Exess of Par 25,900

Jika warrant tak diexercise Account Debit Kredit Stock Warrant 2,900 PIC From Expired Warrant

Jumlah opsi dapat berubah Stock Option Opsi untuk membeli saham perusahaan dengan harga tertentu yang diberikan ke officer atau karyawan Jumlah opsiTetap Stock Option Jumlah opsi dapat berubah

Cara pencatatan Metode nilai intrinsik Metode Fair Value Harga Opsi = ditentukan dengan formula tertentu Harga Opsi = selisih antara harga pasar saham dengan harga excercise

Fixed Option ( Metode nilai intrinsik) Selisih antara Harga pasar saham saat pemberian opsi dengan harga beli saham (exercise)

PT. A pada tanggal 1 Januari 2000 memberikan hak opsi untuk membeli 10 PT. A pada tanggal 1 Januari 2000 memberikan hak opsi untuk membeli 10.000 lembar saham PT. A dengan harga $50 per lembar ke pegawai yang tetap bekerja tiga tahun mulai 1 Januari 2000 s.d. 31 Desember 2002. Harga Pasar saham pada waktu itu $50.00 per lembar. Harga opsi = 10.000 x (50-50 = 0 Tidak ada jurnal

Metode Fair Value

PT. A pada tanggal 1 Januari 2000 memberikan hak opsi untuk memberli 10.000 lembar saham PT. A dengan harga $50 per lembar ke pegawai yang tetap bekerja tiga tahun mulai 1 Januari 2000 s.d. 31 Desember 2002. Opsi ini memiliki fair value $10 per lembar Opsi Karyawan Perusahaan Jasa Nilai opsi/Jasa = 10.000 x $10 = $ 100,000 Nilai opsi = Menunjukkan besarnya nilai jasa karyawan selama 3 tahun karena mereka harus kerja 3 tahun untuk mendapatkan opsi ini

Nilai opsi/Jasa = 10.000 x $10 = $ 100,000 Timbul Expense selama 3 tahun Timbulan setoran calon pemodal dalam bentuk jasa Account Debit Kredit Compensation Expense 33,333 Paid In Capital From Stock Option 3,333

Opsi yang berubah Lihat slide stock based compensation

Konversi Saham Preferent ke Saham Biasa Harga jual Prefered Stock Dulu dianggap harga pasar dari Saham biasa yang sekarang diserahkan Saham Biasa Pemegang Saham PT. A PT. A Saham Prefrerent

Konversi Saham Preferent ke Saham Biasa Harga jual Prefered Stock Dulu dianggap harga pasar dari Saham biasa yang sekarang diserahkan Harga jual SP > Nominal SB Harga jual SP < Nominal SB Selisihnya dianggap agio Selisihnya dibebankan Ke Retained earning

Convertible Preferred Stock Account Debit Kredit