【正文】 of value for services rendered. Existing financial models allow us to measure the value of these options when they are granted. When the pany grants other items of value to employees, they record an expense. 1011 Stock options reward the employees only if the stock appreciates in value. Stock options create incentives for employees to work hard in the best interests of the shareholders. There can also be tax advantages to options.1012 Cash dividends are real in the sense that they require the disbursement of assets. Stock dividends involve disbursement of real assets only when the dividend rate per share is maintained and a stock dividend results in an increase in total dividends.1013 No. It is impossible to increase every shareholders’ fractional portion of the pany because every shareholder receives the same proportional distribution.1014 The use of highpercentage stock dividends (20% or more) is merely another way of obtaining a stock split. Sometimes such transactions are called a “stock split effected in the form of a stock dividend.” While the economic effects are the same for large stock dividends and for splits, different stockholders’ equity accounts may be involved in the accounting. 1015 Yes, if shares are repurchased and permanently retired, the purchase price is charged against mon stock, additional paidin capital, and retained earnings. If the shares are to be held only temporarily, they are listed as treasury stock and deducted from stockholders’ equity in total, and individual parts of stockholders’ equity are not reduced.1016 No. To retire shares, a pany must pay the market price per share.1017 There are many reasons a pany might buy back its own stock. It might be the most efficient way to distribute excess cash to shareholders, especially after considering tax consequences. It also allows more flexibility in timing and amount of payment than does the payment of dividends. Further, it may not create an expectation of higher dividends in the future. Finally, it can demonstrate management’s confidence in the prospects for the pany.1018 Treasury stock is not an asset because it is a reduction of stockholders’ equity. Treasury stock is acquired by distributing cash or other assets to shareholders. It arises from a return of assets previously contributed by shareholders.1019 Although the specific accounting for transactions in the pany’s own stock may vary from pany to pany, one rule is paramount. Any difference between the acquisition price and resale price of treasury stock is never reported as a loss, expense, revenue, or gain in the ine statement. Why? A corporation’s own capital stock is part of its capital structure. It is not an asset of the corporation. Nor is stock intended to be treated like merchandise for sale to customers at a profit. Therefore, changes in a corporation39。s capitalization should produce no accounting gain or loss, but should be recorded as direct adjustments to the stockholders’ equity.1020 The proper amount is the “fair value” of either the issued securities or the ining assets, whichever is more objectively determinable. That same amount should be used by both parties to the exchange.1021 A conversion option allows an investor to participate in a pany’s success by converting to mon shares. Meanwhile, the investor can receive the interest on bonds or dividends on preferred stock, and they do not bear the risk of declines in the price of the mon stock. These options are valuable, so they make the bond or preferred stock more valuable to an investor.1022 A voluntary restriction on dividenddeclaring power may take the form of a reserve for contingencies (also called an appropriation of retained earnings for contingencies). The reserve may be used to restrict dividend payments in order to retain cash for a particular purpose such as plant expansion. Completely involuntary are restrictions under state law that prohibit payment of dividends if retained earnings is negative or debt covenants restrict such payments. 1023 Restrictions on dividenddeclaring power protect the rights of creditors. Such restrictions may be a necessary to borrow money. They may also reduce the interest rate lenders would require. Finally, restrictions inform investors about the intentions of the board.1024 ROE provides information about the returns investors in general get from the cumulative investments they have made in the pany. However, most investors do not buy shares directly from the pany。158,611 247。 Cash 158,611 Common stock 103,517 Capital surplus 55,094 To account for 165。95 per share: 165。103,517 And (165。62) 1, = 165。62 247。 = 65% of the issue price. 1034 (15–20 min.)1. Common Dividends Net Ine Declared In Arrears Declared 20X1 $(5,000,000) – $5,000,000 – 20X2 (4,000,000) – 10,000,000 – 20X3 15,000,000 $ 6,000,000** 9,000,000* – 20X4 20,000,000 14,000,000*** – $6,000,000*** 20X5 14,000,000 5,000,000 – 9,000,000 Total $40,000,000 $25,000,000 $15,000,000 * $5 million per year times 3 years, less $6 million paid in 20X3. ** Available to declare = $(5) + $(4) + $15 = $6 million. All goes to preferred.*** Available to declare = $20 million, preferred receives $9 million arrearage plus $5 million for 20X4, balance to mon.The board of directors is not legally obligated to declare dividends at any time. Whether these amounts would be declared and paid at the indicated times would depend on the cash position, liabilities, and general financial plans. Indeed, the likelihood of these large dividends being paid so soon is small. Nonetheless, as long as the balance of retained earnings is positive, in most states, the board could legally declare dividends that would decrease the balance to zero.Holders of cumulative stock would receive accumulated dividend