Chapter 8

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Oct 17, 2023
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Ownership of shares entitles shareholders to four basic rights, unless specific rights are withheld by agreement with the shareholders: 1. The right to sell the shares. Shareholders have the right to sell their shares to other parties when they no longer wish to own them. 2. The right to vote. Shareholders have the right to participate in management by voting on matters that come before them. This is the shareholder's sole voice in the management of the corporation. A shareholder is normally entitled to one vote for each common share owned. There are some classes of common shares that give the holder multiple votes or no vote. 3. The right to receive dividends. Shareholders have the right to receive a proportionate share of any distributions from the company's retained earnings. Each share in a particular class receives an equal dividend. 4. The right to receive a residual interest upon liquidation. Shareholders have the right to receive a proportionate share of any assets remaining after the corporation pays all liabilities upon liquidation. When a company goes out of business, it sells its assets, pays its liabilities, and distributes any residual (or remaining) assets to shareholders. Shareholders' equity has four common and separate components: 1. Share capital —amounts contributed by shareholders in exchange for shares in the corporation. 2. Contributed surplus —any amounts contributed by shareholders in excess of amounts allocated to share capital. Total capital stock = share capital + contributed surplus. Share capital = common + preferred shares
3. Accumulated other comprehensive income —IFRS require companies to report Accumulated Other Comprehensive Income, which is an accumulation of past earnings not included in retained earnings. This equity item requires an advanced understanding of accounting concepts, so it will not be covered in this textbook. ASPE do not require companies to account for this item. 4. Retained earnings —the accumulated balance of a corporation's net income since inception, less any net losses and dividends declared during this time. When the accumulation is a negative number, as it is for Dollarama, the term deficit is used to describe it. 5. Total shareholder's equity = share capital + contributed surplus + retained earnings + other comprehensive income Authorized refers to the maximum number of shares a corporation is allowed to distribute to shareholders. Issued refers to the number of shares sold or transferred to shareholders Outstanding shares are those in the hands of shareholders Preferred shares: give their owners certain advantages over common shareholders Treasury shares: a corporation buys back shares from shareholders. Per value share: are shares of stock that have a value assigned to them by the articles of incorporation, which specify the legal details associated with a company's incorporation. Stated value: the shares are assigned a value when they are issued; this value is known as the Following transactions: Issuing for cash: Issuing shares for assets other than cash
The date of declaration: the date on which the board of directors officially declares the payment of a dividend, creating a liability for the amount declared. The following entry is: The date of record: In order to receive the declared dividend, one must be officially registered as a shareholder of the company on this date. No entry Is required The date of payment: is the date on which the dividend is actually paid to shareholders. The entry is: Stock dividends: it eventually pays the dividend by issuing additional shares of the company instead of by distributing cash. Dividends on Cumulative and Non-Cumulative Preferred Shares:
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