Cash Effects Accounting Help

In a statement of cash flows, transactions with the stockholders of a corporation are classified as financing activities.

Thus the issuance of capital stock for cash represents a receipt from financing activities. contributions of cash to stockholders-including the payment of cash dividends represent a cash outlay. which is also classified under financing activities. Transactions with owners do not always have an immediate effect on cash flows.

Consider an exchange of the corporation’s capital stock for a noncaloric asset, such as land Cash is not screamed or decreased by this event. These types of noncaloric transactions are described in a special schedule that accompanies the statement of cash flows issue and any dividends in arrears are deducted from total stockholders’ equity.

Second, the remaining amount of stockholders’ equity is divided by the number of common shares outstanding to determine book value per common sh Ire. This procedure reflects the fact that the common stockholders are the residual owners of the corporate ‘entity,To illustrate the computation of book value per share when callable preferred stock is outstanding, assume that the stockholders’ equity of Video Company at December 31 is as follows:

Because-offal cash position. Video. Cornily has: aid no dividend during the current year. As or December 31. dividends in arrears on. All the equity belongs to the common stockholders, exceed )t the $1.1 million call price ($I!Jl X 10,000 shares) applicable to the preferred stock, Id title $80,000 of dividends . ..rears on preferred stock. The calculation ‘of book value per share of common stock , IS as follows: 39


Posted on November 21, 2015 in Stockholders' Equity: Paid-in Capital

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