• Separate Legal Entity
• Limited Liability of Stockholder
• Transferable Ownership Rights
• Continuous Life
• Lack of Mutual Agency for Stockholders
• Ease of Capital Accumulation

• Government Regulation
• Corporate Taxation

1. Costs to organize a corporation, include
1. Legal Fees
2. Promoters' Fees
3. Amounts Paid to Obtain a Charter

1. Stockholders
2. Board of Directors
3. President, VP, and other Officers
4. Employees of Corporation

1. "Angel Investors"
1. Family and Friends
2. Anyone who believes in a [the] company
2. Employees, Investors, and Suppliers who can be paid with stock
3. Venture Capitalists (investors) with a record of entrepreneurial success

1. When a corporation has only one class of stock 
2. Corporation's basic ownership share
1. also generically called capital stock

1. Vote at stockholders' meetings
2. Sell or otherwise dispose of their stock
3. Purchase the proportional share of any common stock later issued by the corporation
4. Receive the same dividend [if any] on each common share of the corporation
5. Share in any assets remaining after creditors and preferred stockholder are paid, if, and when, the corporation is liquidated
6. Receive timely financial reports

1. Paid-in (or contributed) capital
2. Retained Earnings

How can Par Value Stock be issued?

1. At Par
2. At a Premium (above Par)
3. At a Discount (Below Par)

1. Debit: Cash 
1. Amount: $300,000
2. Credit: Common Stock, $10 Par Value
1. Amount: $300,000

1. Debit: Cash
1. Amount: $360,000
2. Credit: Common Stock, $10 Par Value
1. Amount: $300,000 _{($10 par value x 30,000 shares)}
3. Credit: Paid-In Capital in Excess of Par Value, Common Stock
1. Amount: $60,000 _{($12 issue price - $10 par value x 30,000 shares)}

1. Debit Discount on Common Stock Account
2. Balance is subtracted from par value of stock in the equity section on the balance sheet

1. Debit: Cash
1. Amount: $40,000
2. Credit: Common Stock, No-Par Value
1. Amount: $40,000 _{($40 issue price x 1,000 no-par shares)}

What Happens When No-Par Stock is Issued and is Assigned a Stated Value?

1. Excess is credited to Paid-In Captal in Excess of Stated Value
2. Reported in the stockholders' equity section

1. Debit: Cash
1. Amount: $50,000
2. Credit: Common Stock, $40 Stated Value
1. Amount: $40,000 _{($40 stated value x 1,000 shares)}
3. Credit: Paid-In Capital in Excess of Stated Value, Common Stock
1. Amount: $10,000 _{([$50 issue price - $40 stated value] x 1,000 shares)}

1. Debit: Land
1. Amount: $105,000 (market value at date of transcation)
2. Credit: Common Stock
1. Amount: $80,000 _{($20 par value x 4,000 shares)}
3. Credit: Paid-In Capital In Excess of Par Value, Common Stock
1. Amount: $25,000 _{($105,000 asset value - $80,000 stock value)}

1. Debit: Ogranization Expenses
1. Amount: $12,000
2. Credit: Common Stock, $15 Par Value
1. Amount: $9,000($15 par value x 600 shares)
3. Credit: Paid-In Capital in Excess of Par Value, Common Stock
1. Amount: $3,000 _{($12,000 services value - $9,000 stock value)}

1. Date of Declaration
2. Date of Record
3. Date of Payment

1. [Future] Date directors specify for identifying stockholders to receive dividends
1. Those who own stock on the date of record receive dividends

1. Debit: Retained Earnings
1. Amount: $5,000
2. Credit: Common Dividend Payable
1. Amount: $5,000 _{($1 per share x 5,000 outstanding shares)}

1. Date of Declaration
2. Date of Payment

1. Debit: Common Dividend Payable
1. Amount: $5,000
2. Credit: Cash
1. Amount: $5,000

1. Debit (abnormal) balance in Retained Earnings
1. Occurs when cumulative losses and dividends exceed cumulative income
2. Accumulated Deficit

Common Stock (par value x shares) + Paid in capitals ± Retained Earnings = Total Stockholders' Equity

1. Distribution of assets that returns part of the original investment to stockholders
2. Deducted from contributed captial accounts

1. Corporation's distribution of its own stock to its stockholders without the receipt of any payment
2. Does not reduce assets and equity
3. Transfers a portion of equity from retained earnings to contributed capital

Record a Journal Entry for a Small Stock Dividend

1. 10% Stock Dividend
2. 10,000 Issued and Outstanding Shares
3. $15 Market Price
4. $10 Par Value

1. Debit: Retianed Earnings
1. Amount: $15,000
2. Credit: Common Stock Dividend Distributable
1. Amount: $10,000 _{(10% dividend x 10,000 issued shares x $10 par value)}
3. Credit: Paid-In Capital in Excess of Par Value, Common Stock
1. Amount: $5,000 _{(10% dividend x 10,000 issued shares x [$15 market price - $10 par value])}

When the stock dividend is declared

It is not affected when the stock is distributed