Matakuliah
Tahun
: V0232 – Akuntansi Keuangan Hotel
: 2009
Hospitality Financial Accounting
Week 12
Sole Proprietorships, Partnerships, and
Corporations
14-1 Partnership Characteristics –
Advantages and Disadvantages
Partnership Characteristics
The partnership is a voluntary association of individuals based on a legally binding contract.
A partnership has mutual agency where each partner acts on behalf of the partnership when engaging
The partnership is a limited life dependent upon the partnership contract.
The partners have unlimited liability making each partner individually liable for all partnership liabilities.
Partner assets are co-owned by the partners.
Advantages
Disadvantages
The combination of the skills and resources of two
Mutual agency.
Partnerships are easily formed and relatively free
regulations and restrictions.
Unlimited liability.
Decisions can be made quickly on substantive
Limited life.
14-2 Partnership Agreement or Articles of CoPartnership
Name and principal location of the firm
Purpose of the business
Date of inception
Names and capital contributions of partners
Rights and duties of partners
Basis for sharing net income or net loss
Provision for withdrawals of income
Procedures for submitting disputes to arbitration
Procedures for the withdrawal or addition of a partner
Rights and duties of surviving partners in the event of a partner’s death
14-3 Entries Required when Forming a
Partnership
Book Value
Market Value
A. Rolfe
T. Shea
A. Rolfe
T. Shea
Cash
$8,000
$9,000
$8,000
$9,000
Equipment
5,000
Accumulated depreciation
4,000
(2,000)
Accounts receivable
4,000
4,000
Allowance for doubtful accounts
(700)
(1,000)
$11,000
$12,300
$12,000
Entries to record the investment are:
Investment of A. Rolfe
Cash
8,000
Equipment
4,000
A. Rolfe, Capital
(To record investment by A. Rolfe)
12,000
Investment of T. Shea
Cash
9,000
Accounts Receivable
4,000
Allowance for Doubtful Accounts
1,000
T. Shea, Capital
(To record investment by T. Shea)
12,000
$12,000
14-4 Corporate Characteristics –
Advantages and Disadvantages
ADVANTAGES
DISADVANTAGES
Separate legal existence
Limited liability of stockholders
Corporation management – separation of
management
Transferable ownership rights
Ability to acquire capital
Government regulations
Continuous life
Corporation management – professional
Additional taxes
CORPORATE FORM OF BUSINESS ORGANIZATION
14-5 Stock Issue Terms
Shares Authorized
Anticipated number of shares to meet the needs of the company and
Par Value
The legal amount assigned to each share of stock in the corporate charter.
Market Value
Actual market price paid for the stock in an arm’s length transaction.
Shares Issued
Actual number of shares that are sold to investors or underwriters.
RELATIONSHIP OF PAR AND NO-PAR VALUE STOCK TO LEGAL CAPITAL
Stock
Legal Capital per Share
Par value
Par value
No-par value with stated value
Stated value
No-par value without stated value
Entire proceeds
14-6 Issue of Stock
Boomer Corporation issues 2,000 shares of common stock at $10 per share.
Stock has $4 par value.
Cash
Stock has no par value.
20,000
Common Stock
Cash
8,000
Paid-in Capital in Excess of Par
Value
20,000
Common Stock
12,000
Stock has $4 stated value.
Cash
Common Stock
Paid-in Capital in Excess of
Stated Value
20,000
Stock has no stated value.
20,000
Cash
8,000
Common Stock
12,000
Note: The amount credited to the Common Stock account becomes legal capital.
20,000
8,000
14-7 Treasury Stock Transactions
Boomer Corporation acquires 100 shares of its $4 par value common
them as treasury stock.
Treasury Stock
1,500
Cash
1,500
Boomer Corporation sells 25 shares of its treasury stock for $18 per
Cash
450
Treasury Stock
375
Paid-in Capital from Treasury Stock
75
Boomer Corporation sells 25 shares of its treasury stock for $14 per
Cash
350
Paid-in Capital from Treasury Stock
25
Treasury Stock
375
14-8 Requirements for Cash Dividends
1.
Retained earnings.
2.
Adequate cash.
3.
A declaration of dividends (by board of directors).
BOARD OF DIRECTORS
RELEVANT DIVDEND DATES AND ENTRIES FOR CASH DIVIDENDS
Declaration Date
Retained Earnings
XXX
Dividends Payable
Record Date
No entry
Payment Date
Dividends Payable
Cash
STOCKHOLDERS
XXX
XXX
XXX
14-9 Stock Dividends
REASONS FOR STOCK DIVIDENDS
1. Satisfy dividend expectations of stockholders without spending cash.
2. Increase marketability of stock by increasing the number of shares outstanding and
3. Emphasize the permanent reinvestment of stockholders’ equity that is unavailable for
BOARD OF DIRECTORS
SUMMARY OF STOCK DIVIDEND ENTRIES
Declaration Date
Issuance Date
Retained Earnings
XX
Common Stock Dividends
XX
Paid-in Capital in Excess of Par
XX
Common Stock Dividends Distributable
XX
Common Stock
XX
Small stock
Retained earnings reduced by fair market value of
Large stock
Retained earnings reduced by par value of stock.
STOCKHOLDERS
14-10 Effects of a Stock Dividend on
Stockholders’ Equity
Stockholders’ Equity Before a 10% Stock Dividend
Stockholders’ Equity
Paid-in capital
Common Stock, $10 par value, 100,000 shares issued and
$1,000,00
Additional paid-in capital in excess of par value
200,000
Total paid-in capital
1,200,000
Retained earnings
300,000
Total stockholders’ equity
$1,500,00
(Market Value = $15)
Board of Directors Declares and Distributes a 10% Stock Dividend
Entries:
Retained Earnings (100,000 X .10 X $15)
150,000
Common Stock Dividends Distributable
100,000
Paid-in Capital in Excess of Par Value
50,000
Common Stock Dividends Distributable
Common Stock
100,000
100,000
14-10 Effects of a Stock Dividend on Stockholders’ Equity
(continued)
Stockholders’ Equity After a 10% Stock Dividend
Stockholders’ Equity
Paid-in capital
Common Stock, $10 par value, 110,000 shares issued and outstanding
Additional paid-in capital in excess of par value
Total paid-in capital
Retained earnings
Total stockholders’ equity
$1,100,000
250,000
1,350,000
150,000
$1,500,000
14-11 Effect of a Stock Split on
Stockholders’ Equity
Stockholders’ Equity Before a 2 for 1 Stock Split
Stockholders’ Equity
Paid-in capital
Common Stock, $10 par value, 100,000 shares issued and outstanding
$1,000,000
Additional paid-in capital in excess of par value
200,000
Total paid-in capital
1,200,000
Retained earnings
300,000
Total stockholders’ equity
$1,500,000
Stockholders’ Equity After a 2 for 1 Stock Split
Stockholders’ Equity
Paid-in capital
Common Stock, $5 par value, 200,000 shares issued and outstanding
$1,000,000
Additional paid-in capital in excess of par value
200,000
Total paid-in capital
1,200,000
Retained earnings
300,000
Total stockholders’ equity
$1,500,000
Comparative Effects
Item
Stock Split
Stock Dividend
Total paid-in capital
No change
Increase
Total retained earnings
No change
Decrease
Total par value (common stock)
No change
Increase
Par value per share
Decrease
No change
14-12 Retained Earnings Statement
KAYTEL, INC.
Retained Earnings Statement
For the Year Ended December 31, 2008
Balance, January 1, as reported
$900,000
Correction for Understatement of Net Income in Prior Period
(Inventory error)
75,000
Balance, January 1, as adjusted
975,000
Add:
400,000
Net income
1,375,000
Less:
Cash dividends
$75,000
Stock dividends
50,000
Balance December 31
125,000
$1,250,000