Page 507 - Accounting Principles (A Business Perspective)

12. Stockholders' equity: Classes of capital stock

(2) Cash (+A) 13,500
Preferred Stock (+SE) 9,000
Paid-In Capital in Excess of Par Value—Preferred 4,500
(+SE)
To record the issuance of 750 shares for cash, at
$18
per share.
(3) Organization Costs (+A) 9,000
Common Stock (+SE) 6,000
Paid-In Capital in Excess of Par Value—Common 3,000
(+SE)
To record the issuance of 1,000 shares in exchange
for
legal services.

b. TERRIER COMPANY
Partial Balance Sheet
2009 June 30
Paid-in Capital:
Preferred stock—$12 par value, 14% cumulative; $ 9,000
1,000shares authorized; issued and outstanding, 750
shares
Common stock—$6 par value per share; 100,000 306,000 $ 315,000
shares
authorized; issued and outstanding, 51,000 shares
Paid-in capital in excess of par value:
From preferred stock issuances $ 4,500
From common stock issuances 903,000 907,500
Total paid-in capital $1,222,50
0
Key Terms
Articles of incorporation The application for the corporation's charter.
Board of directors Elected by the stockholders to have primary responsibility for formulating policies for
the corporation. The board also authorizes contracts, declares dividends, establishes executive salaries, and
grants authorization to borrow money.
Book value per share Stockholders' equity per share; the amount per share each stockholder would
receive if the corporation were liquidated without incurring any further expenses and if assets were sold and
liabilities liquidated at their recorded amounts.
Bylaws A set of rules or regulations adopted by the board of directors of a corporation to govern the conduct
of corporate affairs. The bylaws must be in agreement with the laws of the state and the policies and purposes
in the corporate charter.
Callable preferred stock If the stock is nonconvertible, it must be surrendered to the company when the
holder is requested to do so. If the stock is convertible, it may be either surrendered or converted into
common shares when called.
Call premium (on preferred stock) The difference between the amount at which a corporation calls its
preferred stock for redemption and the par value of the stock.
Capital stock Transferable units of ownership in a corporation.
Capital stock authorized The number of shares of stock that a corporation is entitled to issue as
designated in its charter.
Capital stock issued The number of shares of stock that have been sold and issued to stockholders.
Capital stock outstanding The number of shares of authorized stock issued and currently held by
stockholders.
Common stock Shares of stock representing the residual equity in the corporation. If only one class of
stock is issued, it is known as common stock. All other claims rank ahead of common stockholders' claims.
Convertible preferred stock Preferred stock that is convertible into common stock of the issuing
corporation.

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