Nature Of A Corporation

1Nature of a corporation (499) “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of the law” 2Characteristics of corporations (499) Corporation may buy, own and sell or give away property in its own name like people can. Owners of a corporation are called stockholders or shareholders because they own shares or stocks of a corporation. Stockholders have limited liability 3Types of Corporations (499) Public corporations – corporations whose shares are sold to the public Private (non public) corporations – corporations whose shares are owned by a small group of investors 4Organization of corporations (500) Stockholders elect a board of directors who select CEO’s who hire employees to work for the corporation. The board distributes funds earned to shareholders Since a corporation is a separate entity, like people, they are required to pay all the taxes that are required of us. 5Stockholder’s equity (501) Stockholder’s equity replaces owner’s equity because the stockholders are the owners; it is also referred to as shareholder’s equity, shareholder’s investment, or capital. Two sources of capital are the paid-in capital or contributed capital which is given by shareholders and other investors, and the second is retained earnings. Stockholder’s equity Paid-in capital Common Stock Retained Earnings Total stockholder’s equity

. $330,000 80,000 $410,000

6Capital (502 top) Paid-in capital is recorded in a separate account for stock. If there is only once class of stock, it is called Common Stock, or Capital Stock The retained earnings are the same as net income or net loss. When a coration suffers from a net loss it is called a deficit. In the stockholder’s equity section, the deficit is subtracted from paid-in capital to determine total stockholder’s equity. 7Paid-in capital (502-508) Stock involves the amount of shares a corporation can issue to shareholders. When it is in the hands of the shareholders it is called outstanding stock.

8Reporting paid- in capital (509) Illustration on 509 9Accounting for dividends (510-514) Cash dividends - explain Stock dividends - explain Liquidating dividends - explain 10Retained earnings statement (516) Definition in book and illustration 11Combined income and retained earnings statement (516-517 top) Definition in book before and after illustration and illustration 12Statement of stockholder’s equity (517) Definition and illustration from book 13Unusual items that afect the income statement (540-541) Discontinued operations Extraordinary items of loss or gain Change from one GAAP to another 14Discontinued operations (541-542 top) Summary of provided info 15Extraordinary itmms of loss or gain (542) Summary of provided info 16Change in GAAP (542) Summary of provided info 17Business Combinations (553-554) Mergers and consolidations Parent and subsidiary corporations 18Mergers and consolidations (553) Summary of provided info 19Parent and subsidiary corporations (553-554 top) Summary of provided info 20Financing Corporations (573) Paragraph 1 and 2 summarized 21BONDS (list of issues concerning bonds to be discussed)

Bonds definition – on this slide Characteristics of bonds payable Bond sinking funds Bond redemption Investment in bonds 22characteristics of bonds payable (574-575) Summary of bonds payable 23Bond sinking funds (582) Summary of information given 24Bond redemption (582-583) Summary of information given 25Investment in bonds (583-585) Summary of provided information 26Corporation Balance Sheet (585-587) Summary of paragraphs and illustration 27Purpose of Statement of cash flows (606) info given in book 28Reporting Cash Flows (607) Summary of info in book 29Cash flows (607 bottom-608) From operating activities From Investing Activities From Financing Activities 30Statement of cash flows direct method (619-624) Illustrations and definitions and summary of information on pages 619-624