FAR M13- Stockholders Equity参考.doc

Study Notes- FAR M13 (Stockholder’s Equity) Types of Common Stock There are different types of common stock based on whether or not they have a par value. Par value is essentially the stated value of the stock that is printed on the share itself. However, the par value does not impact the selling price of the stock. The par value is assigned to the shares when they are registered and does not need to be any specific amount. In fact, par value is usually a small amount because of what it represents. When the shares are sold, the par value of the shares will be put into the Common Stock account. There are two types of shares based on the existence of a par value: Par (or Stated) Value Par value is the specified value printed on the share itself. Par value is the maximum amount of a shareholder?ˉs liability to the creditors of the company. The par value of all shares issued and subscribed represents the legal or stated capital of a company. Legal capital is the portion of contributed capital that is required by statute to be retained in a business. This capital cannot be distributed as dividends. Because of this restriction on distribution, companies may choose to have a very low par value. No-Par Value For stock that does not have a par value, the legal capital is the total amount that is received when the shares are issued and the whole amount received is credited to the common stock account. Stock Subscriptions Page 522 on Wiley’s book has all the details. Types of Preferred Stocks There are many different types of preferred stock, but three of the most common that you should be familiar with are: Redeemable Preferred Shares: These preferred shares may be sold back to the company at a specified price at the option of the shareholder Convertible Preferred Shares: These shares may be converted into common shares at the option of the shareholder. If they are converted, the newly issued common shares are recorded at the book value of the preferred shares that w