intermediate accounting 15th edition ch15.ppt.pptVIP

Describe the policies used in distributing dividends. Identify the various forms of dividend distributions. Explain the accounting for small and large stock dividends, and for share splits. Indicate how to present and analyze stockholders’ equity. After studying this chapter, you should be able to: LEARNING OBJECTIVES Discuss the characteristics of the corporate form of organization. Identify the key components of stockholders’ equity. Explain the accounting procedures for issuing shares of stock. Describe the accounting for treasury stock. Explain the accounting for and reporting of preferred stock. Stockholders’ Equity 15 Presentation and Analysis of Equity Illustration 15-13 Presentation LO 9 Illustration 15-14 Statement of Stockholders’ Equity Presentation and Analysis of Equity LO 9 Analysts use stockholders’ equity ratios to evaluate a company’s profitability and long-term solvency. Three ratios: Rate of return on common stock equity. Payout ratio. Book value per share. Presentation and Analysis of Equity Analysis LO 9 Illustration: Marshalls Inc. had net income of $360,000, declared and paid preferred dividends of $54,000, and average common stockholders’ equity of $2,550,000. Illustration 15-15 Analysis Rate of Return on Common Stock Equity Ratio shows how many dollars of net income the company earned for each dollar invested by the owners. LO 9 Illustration: Midgley Co. has cash dividends of $100,000 and net income of $500,000, and no preferred stock outstanding. Illustration 15-16 Analysis In the fourth quarter of 2011, 36 percent of the earnings of the SP 500 was distributed via dividends. Payout Ratio LO 9 Illustration: Uretz Corporation’s common stockholders’ equity is $1,000,000 and it has 100,000 shares of common stock outstanding Analysis Amount each share would receive if the company were liquidated on the basis of amounts reported on the balance sheet. Book Value per Share Illustration 15-17 LO 9 Dividend Preferences Illustration: In 2014,