Download ppt - Actpaco quiz6 yahoo

CORPORATION

HELLO

RETAINED EARNINGS

Retained Earnings represent the undistributed earnings of the corporation arising from its operations. The balance is divided into two parts:(1)Appropriated Retained Earnings – set for particular purpose(2)Unappropriated Retained Earnings – available for distribution as dividends to the shareholders.

APPROPRIATED RETAINED EARNINGS

Appropriations to Report to Legal Restrictions* Mandated by law that retained earnings be

appropriated or set aside.* e.g., Appropriation for Treasury Shares

Appropriations to Report to Contractual Restrictions* appropriation as agreed with creditors and

shareholders * e.g., Appropriation for Bond Redemption and

Appropriation for Share Capital Redemption


Appropriations to Report to Discretionary Action by Board of Directors

* appropriation for actual use or planned use in the future of resources as authorized by board of directors

* e.g., Appropriation for Plant Expansion and Appropriation for General Contingencies


Appropriations of Retained EarningsRetained Earnings

Retained Earnings Appropriated for…

Cancellation of AppropriationRetained Earnings Appropriated for…

Retained Earnings

RETAINED EARNINGS - FREE

Retained Earnings, BeginningAdd: Net income Cancellation of RE appropriationDeduct: Net loss Declaration of dividends RE appropriationRetained Earnings, End

DIVIDENDS

Dividends are distribution to shareholders of corporate earnings in proportion of shares held by them.

(1)Dividends paid out of accumulated earnings of the corporation(2)Dividends paid as return of shareholders’ invested capital (liquidating dividend)

Only outstanding shares are eligible to receive dividends.

DIVIDENDS DATES

DATE OF DECLARATION date when board of directors approve to distribute dividends.

DATE OF RECORDdate when company determines the shareholders entitled to receive

declared dividends.Share capital are selling dividends-on prior to this date and are selling

ex-dividends the day following this date.DATE OF PAYMENT

date when dividends declared are paid or distributed to the shareholders.

TYPES OF DIVIDENDS

1.) Cash Dividends2.) Scrip Dividends3.) Property Dividends4.) Stock Dividends

a. Small Share Capital Dividendb. Large Share Capital Dividend

CASH DIVIDENDS

Cash dividends are dividends distributable in the form of cash

DATE OF DECLARATION Retained Earnings

Cash Dividends PayableDATE OF RECORD

No entryDATE OF PAYMENT

Cash Dividends PayableCash

Cash Dividends Payable is part of current liability.

CASH DIVIDENDS

(1) PESO DIVIDENDS (A cash dividend expressed in peso amount)Cash dividends payable = Peso dividend * number of outstanding shares

(2) PERCENTAGE DIVIDENDS (A cash dividend expressed in percentage)Cash dividends payable = dividend % * total par or stated value of

outstanding share capital

The amount of cash dividends declared should not exceed the amount of cash reported on the statement of financial position or cash needed for current operations.

TYPES OF DIVIDENDS

1.) Cash Dividends2.) Scrip Dividends3.) Property Dividends4.) Stock Dividends

a. Small Share Capital Dividendb. Large Share Capital Dividend

SCRIP DIVIDENDS

Scrip dividends are deferred cash dividends declared when the corporation has sufficient retained earnings balance but not sufficient funds at that time for a cash dividends. Scrip dividends consist of a written promise to pay certain amounts at some future date.

PROPERTY DIVIDENDS

Property dividends are dividends distributable in the form of non-cash assets recorded for the fair value of the property to be distributed. Property distributed takes the form of assets that can be easily divided or allocated among shareholders such as stocks of other companies owned by the corporation.

STOCK DIVIDENDS

A share capital dividend is a distribution to shareholders in the form of corporation’s own capital stock.

The transaction is a transfer of capital from retained earnings to contributed capital.

The transaction does not affect total assets and total shareholder’s equity.

STOCK DIVIDENDS

Kinds of Stock Dividends:(1)Small share capital dividend represents less than 20% of outstanding shares.(2)Large share capital dividend represents 20% or more of outstanding shares.

SMALL SHARE CAPITAL DIVIDEND


[Ordinary/Preferred] Share Capital Dividends DistributablePaid-In Capital from Share Capital Dividends

DATE OF PAYMENT [Ordinary/Preferred] Share Capital Dividends Distributable

[Ordinary/Preferred] Share Capital

[Ordinary/Preferred] Share Capital Dividends Distributable = recorded at par or stated value of the shares

Paid-In Capital from Share Capital Dividends = excess of the fair market value of the share over its par or stated value

LARGE SHARE CAPITAL DIVIDEND


[Ordinary/Preferred] Share Capital Dividends Distributable

DATE OF PAYMENT [Ordinary/Preferred] Share Capital Dividends Distributable

[Ordinary/Preferred] Share Capital

[Ordinary/Preferred] Share Capital Dividends Distributable = recorded at par or stated value of the shares

STOCK DIVIDENDS

Kinds of Stock Dividends:(1)Small share capital dividend recorded at fair value of the stocks.(2)Large share capital dividend recorded at par or stated value of the stocks.

[Ordinary/Preferred] Share Capital Dividends Distributable = as addition to Capital of Contributed Capital in Stockholder’s Equity.

Paid-In Capital from Share Capital Dividends = as part of reserves in Stockholder’s Equity.

DIVIDENDS ON PREFERENCE SHARES

When dividends are paid, the dividend requirements on preference shares must be paid before any payment can be made to ordinary shareholders.


Types of Preference Shares(1) Cumulative(2) Non-cumulative(3) Participating(4) Nonparticipating


CUMULATIVEPreference shares entitled to years’ unpaid

dividends or dividends in arrears before the payment of current year’s dividends.NON-CUMULATIVE

Preference shares are not entitled to payment of dividends in arrears but to current year’s dividends only.


PARTICIPATINGPreference shares are entitled to additional

dividends after the payment of regular dividends to both the preference and ordinary shareholders.NON-PARTICIPATING

Preference shares are not entitled to additional dividends after the payment of regular dividends to both the preference and ordinary shareholders.

PARTICIPATING PREFERENCE SHARE

FULLY PARTICIPATINGExcess dividend is allocated proportionately to the two

classes of share capital based on their total par value

PARTICIPATING UP TO A CERTAIN PERCENTAGE Dividend on preference share is the lower of the maximum

allowed participation and the amount based on full participation amounts.

Maximum allowed participation = % x Total value of Preference Shares

SHARES ENTITLED TO DIVIDENDS

Issued shares Not AllSubscribed shares YesDelinquent shares YesTreasury shares No

Treasury shares are issued shares reacquired by the company.

All outstanding shares are issued shares but not all issued shares are outstanding.



Only outstanding shares are eligible for dividend distribution.

Outstanding Shares = Issued Shares – Treasury Shares



Only outstanding shares are eligible for dividend distribution.

Outstanding Shares = Issued Shares – Treasury Shares


NORMAL COMPUTATION: Outstanding Shares = Issued Shares – Treasury Shares

OUTSTANDING SHARES (FOR DIVIDENDS):

Outstanding Shares = Issued Shares – Treasury Shares + Subscribed Shares + Delinquent Shares + Share Dividends Distributable

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

The statement of changes in shareholders’ equity reports transactions or items that cause changes in shareholders’ equity account balances, including:

* profit or loss for the period* other comprehensive income* capital share transactions* retained earnings appropriation

BOOK VALUE PER SHARE

Book value per share is the amount that would be paid on each share assuming the company is liquidated.

The amount available to shareholders is assumed to be exactly the amount reported as total shareholder’s equity.

For computation purposes, subscribed shares should be added to the outstanding shares.

BOOK VALUE PER SHARE

Book Value per Share = Total Shareholders’ Equity Number of Shares Outstanding

EARNINGS PER SHARE

Earnings per share is the amount earned during a given period on each ordinary share outstanding.

EARNINGS PER SHAREEARNINGS PER SHARE = Profit Attributable to Ordinary Share

Outstanding Common Share

Profit or loss per income statementLess: Dividends on preference sharePROFIT ATTRIBUTABLE TO ORDINARY SHARE

DIVIDENDS ON PREFERENCE SHARE = Total par value * dividend rate

If preference shares are cumulative, deduct dividends whether declared or not.If preference share are non-cumulative, deduct dividends only when declared.

INCORPORATING A PARTNERSHIP

A sole proprietorship or a partnership may decide to incorporate to enjoy the advantages of being a corporation.

The following shall be recorded in the corporation books: (1) authorized share capital (2) issuance of share capital for the net assets transferred by the partnership (3) issuance of share capital to other incorporators.


Entries on the partnership books are:(1)Revaluation of net assets(2)Closing of Capital Adjustment Account to partners’ capital accounts (using agreed P/L ratio)(3)Receipt of share capital from net corporation(4)Distribution of share capital to partners(5)Distribution of cash to partners, if any.


REVALUATION OF NET ASSETSMerchandise Inventory

Capital Adjustment AccountEquipmentAccumulated Depreciation

Capital Adjustment AccountNo accumulated depreciation will be recorded upon formation of the corporation.

CLOSE CAPITAL ADJUSTMENT ACCOUNTCapital Adjustment Account

Partner A, CapitalPartner B, Capital


RECORD RECEIPT OF SHARE CAPITAL [Corporation Name] [Ordinary/Preferred] Share CapitalLiabilities assumed

Assets contributedDISTRIBUTION OF SHARE CAPITAL TO PARTNERS


[Corporation Name] [Ordinary/Preferred] Share CapitalDISTRIBUTION OF CASH TO PARTNERS


Cash


NEW CORPORATION’S BOOKS

(1)Record Authorized share Capital(2)Recognize the issuance of share capital

AssetsLiabilitiesOrdinary Share Capital

(3)Record issuance of share capital to other incorporatorCash

Ordinary Share Capital