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Stockholders'Equity. Best Study Notes

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Learning Objectives AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO: ▪ LO1 Identify the advantages and disadvantages of the corporate form of ownership. ▪ LO2 Record the issuance of common ... stock. ▪ LO3 Contrast preferred stock with common stock and bonds payable. ▪ LO4 Account for treasury stock. ▪ LO5 Describe retained earnings and record cash dividends. ▪ LO6 Explain the effect of stock dividends and stock splits. ▪ LO7 Prepare and analyze the stockholders’ equity section of a balance sheet and the statement of stockholders’ equity. ▪ LO8 Make financial decisions using stockholders’ equity ratios. Appendix: ▪ LO9 Account for investments in equity securities. LP 1 p. 431 Feature StoryTHE TOP TEN David Letterman has made the “Top Ten” list famous. His top ten things you don’t want to hear from your accountant include “Listen, I’m not good with math,” “The good news is you’re getting a huge refund—the bad news is you’ll have to hide in Costa Rica for a while,” “Do you have any dedemptions or exuptions or whatever?” and “Relax, everything here will be fine—I used to work for Enron.” Wouldn’t it be nice to know the top ten best stock investments for the future? While we can’t predict the future, we can study the past. The ten best stock investments over the 10-year period from 1997 through 2006 were: Hansen Natural is number one on the list. The company provides a variety of all-natural drinks such as soda, energy, juice, and tea. If you had invested just $1,000 in Hansen Natural in 1997, your investment would have grown to over $255,000 by 2006! Chico’s and American Eagle both are very successful clothing companies. A $1,000 investment in Chico’s and American Eagle in 1997 would have grown to $87,000 and $78,000, respectively. What do all these great stock investments have in common? Well, they were all relatively small and unknown in 1997. Of course, since then each has enjoyed tremendous growth in its equity investment. In this chapter you will learn how to compare earnings in relation to equity—both the stockholders’ equity recorded in the balance sheet and the market value of equity as determined by the price per share times the number of shares [Show More]

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