【正文】 lternative to issuing dividends. If the goal is to facilitate stockholders in their desires to enhance their cash positions without mitting to cash dividends every quarter going forward, it is not a source of operating gains and losses.1028 Your friend is onto something. Par value and the related concept of stated value both have some legal significance in various states. However, the truth is that the number of states and individual panies for whom it matters is small. For practical purposes, this text would probably not cover the topic if it were not so mon in published financial statements.1029 Strictly speaking, this plan does not make sense. If a stock is split or a large stock dividend is issued (more than 25%), the price per share should usually decline in proportion with the new issue. The pany has no more resources than it had before and if each of our shares represents a smaller percentage of ownership, we should expect the value of a share to drop proportionately. However, practically speaking, over the recent past, this has been a reasonably successful strategy. It is hard to explain why. Perhaps it suggests that management’s decision provides new information. If management did not expect things to keep going well, they would not undertake this step. Thus, the act of issuing a split or dividend says, “I am rather sure things will keep going well, as they have been.” 1030 (5 min.) There were 1,750,000 shares issued and outstanding, and 1,000,000 unissued shares: Issued and outstanding: 2,000,000 – 250,000 = 1,750,000 Unissued: 3,000,000 – 2,000,000 = 1,000,000 Summary (not required) Number of Shares Authorized 3,000,000 Unissued (1,000,000) Issued 2,000,000 Deduct: Shares held in treasury (250,000) Issued and outstanding 1,750,0001031 (5 min.) (Amounts in millions.) Issued and outstanding: 2,097 – 758 = 1,339 shares Unissued: 4,688 – 2,097 = 2,591 shares Summary (not required): (in millions) Number of Shares Authorized 4,688 Unissued (2,591) Issued 2,097 Deduct: Shares held in treasury (758) Issued and outstanding 1,3391032 (20 min.) See Exhibit 1032 on the following page.419Chapter 10 Stockholders’ EquityEXHIBIT 1032Liquidation of Claims Under Various Alternatives(In Thousands) Total Cash Proceeds to be Distributed Account Balances $1,400 $1,100 $800 $600 $400 $200Accounts payable $ 300 $ 300 $ 300 $300 $300 $240* $120*Unsubordinated debentures 200 200 200 200 200 160* 80*Subordinated debentures 300 300 300 300 100Preferred stock ($20 par value and $24 liquidating value per share) 100 120 120 Common stock and retained earnings 300 480 180Total liabilities and shareholders’ equity $1,200 Total cash proceeds distributed $1,400 $1,100 $800 $600 $400 $200* Ratio of 60:40 because of claims of $300,000 and $200,000, respectively.1033 (5–10 min.) Amounts are in millions of yen.1. Issue price = 165。CHAPTER 10COVERAGE OF LEARNING OBJECTIVES LEARNING OBJECTIVESQUESTIONSEXERCISESPROBLEMSOTHERLO1: Describe the rights of shareholders.1,2,3,5,16, 22,23,2832,34,3546,47,48,67, 6976LO2: Account for mon stock, including payment of dividends./P/OBJ10,11,12,2030,31,33,36, 44,4549,50,53,54, 55,66,68,71, 7274,75LO3: Contrast bonds, preferred stock, and mon stock.6,8,93776LO4: Identify the economic characteristics of and account for stock splits.14,2938, 3951,53,54,55 76LO5: Account for both large and smallpercentage stock dividends.134052, 56LO6: Explain and report stock repurchases and other treasury stock transactions.4,15,17,18,1926,274157,58,59,60, 61,62,63LO7: Record conversions of debt for equity or of preferred stock into mon stock.7,2165LO8: Use the rate of return on mon equity and book value per share.24,2542,437073CHAPTER 10101 The preemptive privilege gives present shareholders the opportunity to purchase additional shares directly from the corporation before new shares can be sold to the general public. In this way, the shareholders are able to maintain their percentage ownership.102 Unlike individual proprietors or partners, stockholders’ personal assets cannot be claimed by creditors to satisfy the debts of an incorporated entity.103 No. Before a share of mon stock can be outstanding, it must be duly authorized and issued.104 No. Treasury stock is issued stock that has been repurchased by the issuer and is no longer outstanding.105 Dividends are never liabilities unless declared. Here liabilities is used in the strict accounting sense. Cumulative dividends are conditional obligations as the statement implies. 106 No. Liquidating value is the dollar measurement of the preference to receive assets in the event of corporate liquidation.107 Convertible securities are bonds and stocks that can be transformed into mon shares at the option of the holder.108 Preferred stock and debt both have fixed payment rates. A payment on preferred stock is called a dividend while the payment on debt is called interest. While interest is a legal obligation on the periodic payment date, dividends on preferred and mon stock are not an obligation of the pany until declared by the board of directors. Interest is an expense and reduces net ine while preferred and mon dividends do not reduce net ine. Finally interest and dividends are often taxed differently for both the issuer and the investor.109 Bonds are riskier for the corporation because interest and principal payments are legal responsibilities. Preferred stock is riskier for the investor because the corporation has no legal obligation to pay dividends and most preferred stocks have an infinite life.1010 When a pany grants a stock option to an executive, it is giving something