CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 11-1LESSON 11-1

Starting a Corporation

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-1

TERMS REVIEWTERMS REVIEW

Corporation – organization with legal rights of a person and that may be owned by many people

board of directors – group elected by stockholders to run the company

articles of incorporation – written application requesting permission to form a corporation

Charter – Approved articles of incorporation common stock – stock that does not give owners preference

to earnings but does give voting rights preferred stock – stock that does give owners preference to

earnings but no voting rights

page 322

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-1

TERMS REVIEWTERMS REVIEW

stock certificate – paper that shows number of shares, issue date, certificate number, and name of stockholder

par value – value assigned to a share of stock and printed on the stock certificate

par-value stock – share of stock that has authorized value printed on it

no-par-value stock – share of stock that has no authorized value printed on the stock certificate

stated-value stock – no par value stock that is assigned a value by a corporation

organization costs – fees and other expenses of organizing a corporation

page 322

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-1

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1. Nature of business.

2. Types of stock authorized.

3. Initial directors.

ARTICLES OF INCORPORATIONARTICLES OF INCORPORATION page 315

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-1

1. Names of incorporators.

2. Signatures of incorporators.

ARTICLES OF INCORPORATIONARTICLES OF INCORPORATION page 316

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-1

STOCK CERTIFICATESSTOCK CERTIFICATES page 317

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-1

1. Write the date.

2. Enter the account title.

3. Record the receipt numbers.

4. Write the credit amount.

5. Write the debit amount.

TRANSACTIONS INCURRED WHEN TRANSACTIONS INCURRED WHEN STARTING A CORPORATIONSTARTING A CORPORATION page 319

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-1

ORGANIZATION COSTS OF A ORGANIZATION COSTS OF A CORPORATIONCORPORATION page 320

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 11-2LESSON 11-2

Stock Subscriptions and the Balance Sheet

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-2

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1. Write the date.

3. Record memorandum number.

4. Enter debit amount.

5. Enter the account credited.

6. Enter credit amount.

2. Enter the account debited.

JOURNALIZING A STOCK JOURNALIZING A STOCK SUBSCRIPTIONSUBSCRIPTION page 324

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-2

1. List intangible assets as the last category of assets.2. List sources of paid-in capital.

BALANCE SHEET OF A NEWLY BALANCE SHEET OF A NEWLY FORMED CORPORATIONFORMED CORPORATION page 325

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-2

JOURNALIZING CASH RECEIVED JOURNALIZING CASH RECEIVED FOR A STOCK SUBSCRIPTIONFOR A STOCK SUBSCRIPTION page 326

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-2

JOURNALIZING ISSUANCE OF STOCK JOURNALIZING ISSUANCE OF STOCK PREVIOUSLY SUBSCRIBEDPREVIOUSLY SUBSCRIBED page 326

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-2

TERMS REVIEWTERMS REVIEW

subscribing for capital stock intangible assets

page 327

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 11-3LESSON 11-3

Calculating and Journalizing Dividends for a Corporation

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-3

TERMS REVIEWTERMS REVIEW

declaring a dividend – an action by the board of directors to pay stockholders a portion of its earnings

date of declaration – The date that the dividend payment is voted on and approved

date of record – The date that determines which stockholders are to received dividends – whoever holds the stock on that date gets the $

date of payment – Date in which dividends are actually to be paid

page 332

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-3

Calculating Value of Preferred Stock

DIVIDENDSDIVIDENDS page 328

Number of Preferred Shares Par Value = Value of

Preferred Stock×

1,000 $100.00 = $100,000.00×

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-3

DIVIDENDSDIVIDENDS page 328

Calculating Value of Common Stock

Number of Common Shares Stated Value = Value of

Common Stock×

16,000 $20.00 = $320,000.00×

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-3

DIVIDENDSDIVIDENDS page 329

Calculating Dividend of Preferred Stock

=×Value of Preferred Stock

Preferred Dividend Rate

Preferred Dividend Amount

$100,000.00 8% = $8,000.00×

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-3

DIVIDENDSDIVIDENDS page 329

Calculating Amount Available for Common Dividends

Total Amount Available for Dividends

Preferred Dividend Amount =

Amount Available for Common Dividends

–

$24,000.00 $8,000.00 = $16,000.00–

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-3

DIVIDENDSDIVIDENDS page 329

Calculating Dividend Rate for Common Stock

Common Dividend Amount

Value of Common Stock = Common Dividend

Rate÷

$16,000.00 $320,000.00 = 5%÷

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-3

JOURNALIZING DECLARATION OF JOURNALIZING DECLARATION OF DIVIDENDDIVIDEND page 330

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 11-3

JOURNALIZING PAYMENT JOURNALIZING PAYMENT OF A DIVIDENDOF A DIVIDEND page 330