Chapter 10 - Stockholders' Equity

Chapter 10

Stockholders Equity
Questions
Question 10-1

Mostcorporationsfirstraisemoneybysellingstocktothefoundersofthebusinessandtheir
friendsandfamily.Astheequityfinancingneedsofthecorporationgrow,companiespreparea
businessplanandseekoutsideinvestmentfromangelinvestorsandventurecapitalfirms.Angel
investorsarewealthyindividualsinthebusinesscommunitywillingtoriskinvestmentfundsona
promisingbusinessventure.Venturecapitalfirmsprovideadditionalfinancing,ofteninthemillions,
forapercentageownershipinthecompany.Manyventurecapitalfirmslooktoinvestinpromising
companiestowhichtheycanaddvaluethroughbusinesscontacts,financialexpertise,ormarketing
channels.Mostcorporationsdonotconsiderissuingstocktothegeneralpublic(goingpublic)until
theirequityfinancingneedsexceed$20milliondollars.

Question 10-2
The stock of a publicly held corporation trades on the New York Stock Exchange (NYSE),
American Stock Exchange (AMEX), National Association of Securities Dealers Automated
Quotations (NASDAQ), or by over-the-counter (OTC) trading. Examples include Wal-Mart, General
Motors, and General Electric.
A privately held corporation does not allow investment by the general public and normally has
fewer stockholders. Three of the largest private corporations in the United States are Cargill
(agricultural commodities), Koch Industries (oil and gas), and Mars (candy).

Question 10-3
The four basic ownership rights of common stockholders are (1) the right to vote, (2) the right to
receive dividends, (3) the right to share in the distribution of assets, and (4) the preemptive right. The
preemptive right allows a stockholder to maintain his or her percentage share of ownership when
new shares are issued.

Question 10-4
Sole-proprietorships are the most common form of business. However, corporations are larger in
terms of total sales, total assets, earnings, or number of employees.

Question 10-5

Acorporationoffersthreeprimaryadvantagesoversoleproprietorshipsandpartnerships.These
are(1)limitedliability,(2)abilitytoraisecapital,and(3)lackofmutualagency.Becauseoflimited
liability,evenintheeventofbankruptcy,stockholdersinacorporationcanlosenomorethanthe
amounttheyinvestedinthecompany.Because corporations sell ownership interest in
the form of shares of stock, ownership rights are easily transferred. An investor
can sell his or her ownership interest (shares of stock) at any time and without
affecting the structure of the corporation or its

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Chapter 10 - Stockholders' Equity

operations. Finally, a lack of mutual agency means that individual shareholders

cannot legally bind the corporation to a contract.
Acorporationhastwoprimarydisadvantagesrelativetosoleproprietorshipsandpartnerships.
Theseare(1)additionaltaxesand(2)morepaperwork.Corporationshavedoubletaxation.
Corporateincomeistaxedonceonearningsatthecorporatelevelandagainondividendsatthe
individuallevel. Corporations also have more paperwork as federal and state
governments impose expensive reporting requirements on the company.

Question 10-6

AnLLCoranSCorporationallowsacompanytoenjoylimitedliabilityasacorporation,but
avoidthedoubletaxationoftraditionalcorporations.

Question 10-7

Authorizedstockisthetotalnumberofsharesavailabletosell,statedinthecompanysarticles
ofincorporation.Issuedstockisthenumberofsharesthathavebeensoldtoinvestors.Acompany
usuallydoesnotissueallitsauthorizedstock.Outstandingstockisthenumberofsharesheldby
investors.Issuedandoutstandingarethesameamountsaslongasthecorporationhasnot
repurchasedanyofitsshares.Repurchasedshares,calledtreasurystock,areincludedaspartof
sharesissued,butexcludedfromsharesoutstanding.

Question 10-8

1millionsharesareauthorized,100,000sharesareissued,and90,000sharesareoutstanding.

Question 10-9

Parvalueisthelegalcapitalpershareofstockthatsassignedwhenthecorporationisfirst
established.Parvaluehasnorelationshiptothemarketvalueofthecommonstock.Wecreditthe
commonstockaccountforthenumberofsharesissuedtimestheparvaluepershareandwecredit
additionalpaidincapitalfortheportionofthecashproceedsaboveparvalue.

Question 10-10

Thethreepotentialfeaturesofpreferredstockareconvertible,redeemable,andcumulative.
Convertiblemakesitappearmorelikestockholdersequity,whileredeemableandcumulativemake
itappearmorelikelongtermliabilities.

Question 10-11

Investorsincommonstockaretheownersofthecorporation.Investorsinbondsarecreditors
whohaveloanedmoneytothecorporation.Preferredstockfitssomewherebetweencommonstock
andbonds.Forexample,theriskandexpectedreturnaregreatestforinvestmentsincommonstock
followedbypreferredstockandthenbonds.Incontrast,preferenceforpaymentsofinterestand
dividendsaregivenfirsttobonds,thenpreferredstock,andthencommonstock.Illustration108
providesasummary.

Question 10-12
Acompanymaybuybackitsownstocktoboost under-priced stock. When a
companys management feels the market price of its stock is too low, it may
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Chapter 10 - Stockholders' Equity

attempt to support the price by decreasing the supply of stock in the

marketplace. Other reasons why a company might buy back its

10-3

Chapter 10 - Stockholders' Equity

own stock are to distribute surplus cash in the company without paying
dividends, to boost earnings per share, and to offset issuance of shares under
stock-based compensation plans.

Question 10-13

Whenacorporationrepurchasesitsownstock,itincreases,ordebitstreasurystockreportedin
thebalancesheetasareductioninstockholdersequity.Whenacorporationpurchasesstockin
anothercorporation,itincreases,ordebitsaninvestmentaccountreportedinthebalancesheetasan
increaseinassets.

Question 10-14
Some companies are unprofitable and therefore unable to pay cash
dividends. However, many profitable companies choose not to pay cash
dividends. Companies with large expansion plans, called growth companies,
prefer to reinvest earnings in the growth of the company rather than distribute
earnings back to investors in the form of cash dividends.
Investorspurchasestockincompaniesthatdonotpaydividendsbecausetheyexpectshareprices
toincrease.Profitablecompaniesthatreinvestearnings,ratherthanpaydividends,shouldseetheir
sharepriceincrease.

Question 10-15
The declaration date is when the board of directors declares the cash dividend to be paid. The
date of record is the cutoff date. All registered owners on the date of record will be entitled to the
dividend. Finally, the payment date is the date of the actual cash distribution.

Question 10-16

Totalassets,totalliabilities,andtotalstockholdersequitydonotchangeasaresultofa100%
stockdividendora2for1stocksplit.

Question 10-17

Declarationandpaymentofacashdividendreducestotalassetsandtotalstockholdersequity.
Declarationandpaymentofastockdividendhasnoeffectontotalassets,totalliabilities,andtotal
stockholdersequity.

Question 10-18

Ina2for1stocksplitthenumberofsharesoutstandingdoubles,whiletheparvalueandshare
pricedropbyonehalf.

Question 10-19

Thecorrectorderinthestockholdersequitysectionofthebalancesheetispreferredstock,
commonstock,additionalpaidincapital,retainedearnings,andtreasurystock.

Question 10-20

Thestockholdersequitysectionofthebalancesheetshowsthebalanceineachequityaccountata
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Chapter 10 - Stockholders' Equity

pointintime.Incontrast,thestatementofstockholdersequitysummarizesthechangesinthe
balanceineachstockholdersequityaccountoveraperiodoftime.
.

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Chapter 10 - Stockholders' Equity

Question 10-21

Totalstockholdersequityisequaltoassetsminusliabilities.Anassetusuallyequalsitsmarket
valueonthedateitspurchased.However,thetwoarentnecessarilythesameafterthat.For
instance,manybuildingsincreaseinvalueovertime,butcontinuetobereportedinthebalancesheet
athistoricalcostminusaccumulateddepreciation.Nikecreatesbrandawarenessandincreases
marketvaluethroughadvertising,butunderaccountingrules,itexpensesallitsadvertisingcostsas
itincursthem.Thiscausesthetruemarketvalueofassetsandstockholdersequitytobegreaterthan
theamountrecordedforassetsandstockholdersequityintheaccountingrecords.

Question 10-22

Thereturnonequitytendstobelarger.Thereturnonequityisnetincomedividedbyaverage
stockholdersequity.Thereturnonthemarketvalueofequityisnetincomedividedbythemarket
valueofequity.Averagestockholdersequitytendstobesmallerthanthemarketvalueofequity.
Dividingbyasmallernumberresultsinalargerratio.

Question 10-23

PEstandsforpriceearnings.InvestorsusethePEratiotoevaluatethepriceofastockinrelation
tothecurrentearningsgenerated.AhighPEratioindicatesthatthemarkethashighhopesfora
companysstockandhasbiduptheprice.Theyarepricedhighinrelationshiptocurrentearnings
becauseinvestorsexpectfutureearningstobehigher.Ontheotherhand,alowPEratiomight
indicatealackofconfidencebythemarket,oritmightsuggestanunderpricedsleeperorvalue
stock.

BRIEF Exercises

Brief Exercise 10-1

ADVANTAGESOFACORPORATION

LimitedLiabilityEvenintheeventofbankruptcy,stockholdersina
corporationcanlosenomorethantheamounttheyinvestedinthecompany.In
contrast,ownersinasoleproprietorshiporapartnershipcanbeheldpersonally
liablefordebtsthecompanyhasincurred,overandbeyondtheinvestmentthey
havemade.
RaisingCapitalA corporation is better suited to raising capital
than is a sole proprietorship or a partnership.
Lack of Mutual Agency- Individual partners in a partnership
each have the power to bind the business to a contract.
DISADVANTAGESOFACORPORATION

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Chapter 10 - Stockholders' Equity

AdditionalTaxes Ownersofsoleproprietorshipsandpartnershipsaretaxed
once,whentheyincludetheirshareofearningsintheirpersonalincometax
returns.However,corporationshavedoubletaxation.
MorePaperworkTo protect the rights of those who buy a
corporations stock or who loan money to a corporation, the
state and federal governments impose expensive reporting
requirements on the company.

Brief Exercise 10-2

An S Corporation allows a company to enjoy limited liability as a corporation, but
tax treatment as a partnership. Because of these benefits, many companies that
qualify choose to incorporate as an S Corporation. One of the major restrictions is
that the corporation cannot have more than 100 stockholders, so S Corporations
appeal more to smaller, less widely held businesses.

Brief Exercise 10-3

Cash(2,000sharesx$12)
CommonStock(2,000sharesx$0.01)
AdditionalPaidinCapital(difference)
(Issuecommonstockabovepar)

10-7

24,000
20
23,980

Chapter 10 - Stockholders' Equity

Brief Exercise 10-4

Cash(1,000sharesx$20)
CommonStock(1,000sharesx$1.00)
AdditionalPaidinCapital(difference)
(Issuecommonstockabovepar)
Cash(1,000sharesx$20)
CommonStock
(Issuenoparvaluecommonstock)

20,000
1,000
19,000

20,000
20,000

Brief Exercise 10-5

Cash(1,000sharesx$22)
PreferredStock(1,000sharesx$0.01)
AdditionalPaidinCapital(difference)
(Issuepreferredstockabovepar)

22,000
10
21,990

Brief Exercise 10-6

PreferredStockFeatures
__c___1.Convertible
__b___2.Redeemable
__a___3.Cumulative

Description
a.Sharesreceivedividend
priority,ifdividendnotpaid.
b.Sharescanbesoldata
predeterminedprice.
c.Sharescanbeexchangedfor
commonstock.

Brief Exercise 10-7

Preferred dividends for 2012 (1,000 shares x 6% x $50 par value)
Preferred dividends in arrears for 2010 and 2011($3,000 x 2 years)
Remaining dividends to common stockholders
Total dividends
10-8

$3,000
6,000
1,000
$10,000

Chapter 10 - Stockholders' Equity

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Chapter 10 - Stockholders' Equity

Brief Exercise 10-8

TreasuryStock(100sharesx$28)
Cash
(Repurchasetreasurystock)

2,800
2,800

Brief Exercise 10-9

Cash(100sharesx$30)
TreasuryStock(100sharesx$28)
AdditionalPaidinCapital(100sharesx$2)
(Reissuetreasurystockabovecost)

3,000

Cash(100sharesx$26)
AdditionalPaidinCapital(100sharesx$2)
TreasuryStock(100sharesx$28)
(Selltreasurystockbelowcost)

2,600
200

2,800
200

2,800

Brief Exercise 10-10

October1
Dividends(3,000sharesx$0.50)
DividendsPayable
(Declarecashdividends)

1,500
1,500

October15
NoEntry
October31
DividendsPayable(3,000sharesx$0.50)
Cash
(Paycashdividends)

1,500
1,500

Brief Exercise 10-11

June30
StockDividends(20,000sharesx$1.00)
10-10

20,000

Chapter 10 - Stockholders' Equity

CommonStock
(100%stockdividend,largestockdividend)

10-11

20,000

Chapter 10 - Stockholders' Equity

Brief Exercise 10-12

No Entry is recorded for a 2-for-1 stock split since the balance in all of the
accounts remain the same before and after a stock split.
Number of shares: 20,000 x 2 = 40,000
Par value per share: $1.00 2 = $0.50
Market price per share: $25.00 2 = $12.50

Brief Exercise 10-13

Transaction
Issuecommonstock
Issuepreferredstock
Purchasetreasurystock
Saleoftreasurystock

Total
Assets
+
+

TotalLiabilities
NE
NE
NE
NE

Total
Stockholders
Equity
+
+

Brief Exercise 10-14

SilkStation
BalanceSheet
(StockholdersEquitySection)
December31
Stockholdersequity:
Commonstock,$1.00parvalue
Additionalpaidincapital
Totalpaidincapital
Retainedearnings
Treasurystock,50,000shares
Totalstockholdersequity

$1,000,000
17,000,000
18,000,000
10,000,000
(1,100,000)
$26,900,000

10-12

Chapter 10 - Stockholders' Equity

Brief Exercise 10-15

($inmillions)

NetIncome

LimitedBrands

$220

Average
Stockholders
Equity

($2,219+1,874)/2

10-13

Returnon
Equity

10.8%

Chapter 10 - Stockholders' Equity

EXERCISES
Exercise 10-1

Terms
__f___ 1.Publiclyheldcorporation
__d___ 2.ModelBusinessCorporationAct
__h___ 3.ArticlesofIncorporation
__a___ 4.Limitedliability
__g___ 5.Mutualagency
__b___ 6.Doubletaxation
__e___ 7.SCorporation
__c___8.Limitedliabilitycorporation

Definitions
a. Shareholderscanlosenomorethantheamounttheyinvestedinthecompany.
b. Corporateearningsaretaxedtwiceatthecorporatelevelandindividual
shareholderlevel.
c. LikeanScorporation,buttherearenolimitationsonthenumberofownersas
inanScorporation.
d. Designedtoserveasaguidetostatesinthedevelopmentoftheircorporate
statutes.
e. Allowsforlegaltreatmentasacorporation,buttaxtreatmentasapartnership.
f. HasstocktradedonastockexchangesuchastheNewYorkStockExchange
(NYSE).
g. Individual partners in a partnership have the power to bind the
business to a contract.
h. Describe(a)thenatureofthefirmsbusinessactivities,(b)thesharestobe
issued,and(c)thecompositionoftheinitialboardofdirectors.

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Chapter 10 - Stockholders' Equity

Exercise 10-2
Authorized stock is the number of shares the company is authorized to sell, stated in
the companys articles of incorporation.
Issued stock is the number of shares that have been sold to investors.
Outstanding stock is the number of shares held by investors. Issued and outstanding
are the same amounts as long as the corporation has not repurchased any of its shares.
Preferred stock is preferred over common stock in two ways. Preferred stockholders
usually have first rights to a specified amount of dividend and receive preference over
common stockholders in the distribution of assets in the event the corporation is
dissolved.
Treasury stock is the corporations own stock that it reacquired.

Exercise 10-3
Requirement 1
January1,2012
Cash(600sharesx$40)
CommonStock
(Issuenoparvaluecommonstock)
April1,2012
Cash(100sharesx$44)
CommonStock
(Issuenoparvaluecommonstock)

10-15

24,000
24,000

4,400
4,400

Chapter 10 - Stockholders' Equity

Exercise 10-3 (Continued)

Requirement 2
January1,2012
Cash(600sharesx$40)
CommonStock(600sharesx$1.00)
AdditionalPaidinCapital
(difference)
(Issuecommonstockabovepar)
April1,2012
Cash(100sharesx$44)
CommonStock(100sharesx$1.00)
AdditionalPaidinCapital
(difference)
(Issuecommonstockabovepar)
Requirement 3
January1,2012
Cash(600sharesx$40)
CommonStock(600sharesx$1.00)
AdditionalPaidinCapital
(difference)
(Issuecommonstockabovestatedvalue)
April1,2012
Cash(100sharesx$44)
CommonStock(100sharesx$1.00)
AdditionalPaidinCapital
(difference)
(Issuecommonstockabovestatedvalue)

10-16

24,000
600
23,400

4,400
100
4,300

24,000
600
23,400

4,400
100
4,300

Chapter 10 - Stockholders' Equity

Exercise 10-4
Requirement 1
Preferred dividends for 2012 (1,000 shares x 7% x $100 par value)
Preferred dividends in arrears for 2011
Remaining dividends to common stockholders
Total dividends

$7,000
7,000
1,000
$15,000

Requirement 2
Preferred dividends for 2012 (1,000 shares x 7% x $100 par value)
Preferred dividends in arrears for 2011
Remaining dividends to common stockholders
Total dividends

$7,000
0
8,000
$15,000

10-17

Chapter 10 - Stockholders' Equity

Exercise 10-5
February1
Cash(5,000x$15)
CommonStock(5,000x$15)
(Issuecommonstocknoparvalue))
May15
Cash(500x$12)
PreferredStock(500x$10)
AdditionalPaidinCapital
(difference)
(Issuepreferredstockabovepar)
October1
Dividends(5,500sharesx$0.75)
DividendsPayable
(Declarecashdividends)

Debit
75,000

Credit
75,000

6,000
5,000
1,000

4,125
4,125

October15
NoEntry
October31
DividendsPayable(5,500sharesx$0.75)
Cash
(Paycashdividends)

10-18

4,125
4,125

Chapter 10 - Stockholders' Equity

Exercise 10-6
January2,2012
Cash(100,000x$25)
CommonStock(100,000x$1)
AdditionalPaidinCapital(difference)
(Issuecommonstockabovepar)
February6,2012
Cash(2,000x$12)
PreferredStock(2,000x$10)
AdditionalPaidinCapital(difference)
(Issuepreferredstockabovepar)
September10,2012
TreasuryStock(10,000sharesx$30)
Cash
(Purchasetreasurystock)

Debit
2,500,000

Credit
100,000
2,400,000

24,000
20,000
4,000

300,000
300,000

December15,2012
Cash(5,000sharesx$35)
TreasuryStock(5,000sharesx$30)
AdditionalPaidinCapital(5,000x$5)
(Reissuetreasurystockabovecost)

Exercise 10-7

10-19

175,000
150,000
25,000

Chapter 10 - Stockholders' Equity

FinishingTouches
BalanceSheet
(StockholdersEquitySection)
December31,2012
Stockholdersequity:
Preferredstock,$10parvalue
Commonstock,$1.00parvalue
Additionalpaidincapital
Totalpaidincapital
Retainedearnings
Treasurystock,5,000shares
Totalstockholdersequity
*150,000(95,000+1,600)

$20,000
100,000
2,429,000
2,549,000
53,400*
(150,000)
$2,452,400

10-20

Chapter 10 - Stockholders' Equity

Exercise 10-8
March15
Dividends(220,000,000sharesx$0.075)
DividendsPayable
(Declarecashdividends)

Debit
16,500,000

Credit
16,500,000

March30NoEntry
April13
DividendsPayable(220,000,000sharesx$0.075)
Cash
(Paycashdividends)

10-21

16,500,000
16,500,000

Chapter 10 - Stockholders' Equity

Exercise 10-9
March1,2012
Cash(55,000x$52)
CommonStock(55,000x$1)
AdditionalPaidinCapital(difference)
(Issuecommonstockabovepar)
May10,2012
TreasuryStock(5,000sharesx$55)
Cash
(Purchasetreasurystock)
June1,2012
Dividends(150,000sharesx$1.50)
DividendsPayable
(Declarecashdividends)

Debit
2,860,000

Credit
55,000
2,805,000

275,000
275,000

225,000
225,000

July1,2012
DividendsPayable(150,000sharesx$1.50)
Cash
(Paycashdividends)
October21,2012
Cash(2,500sharesx$60)
TreasuryStock(2,500sharesx$55)
AdditionalPaidinCapital(2,500x$5)
(Reissuetreasurystock)

10-22

225,000
225,000

150,000
137,500
12,500

Chapter 10 - Stockholders' Equity

Exercise 10-10
PowerDriveCorporation
BalanceSheet
(StockholdersEquitySection)
December31,2012
Stockholdersequity:
Commonstock,$1.00parvalue
Additionalpaidincapital
Totalpaidincapital
Retainedearnings
Treasurystock,2,500shares
Totalstockholdersequity

$155,000
7,317,500
7,472,500
2,375,000*
(137,500)
$9,710,000

* $2,000,000+$600,000-$225,000

Exercise 10-11
PowerDriveCorporation
StatementofStockholdersEquity
FortheYearEndedDecember31,2012
Additional
Common
Paidin
Retained Treasury
Stock
Capital
Earnings
Stock
Balance,January1
Issuedcommonstock
Purchasetreasurystock
Cashdividends
Saleoftreasurystock
Netincome
Balance,December31

$100,000 4,500,000
55,000 2,805,000

2,000,000

0
(275,000)

(225,000)
12,500
$155,000

7,317,500

10-23

137,500
600,000
2,375,000 (137,500)

Total
Stockholders
Equity
$6,600,000
2,860,000
(275,000)
(225,000)
150,000
600,000
$9,710,000

Chapter 10 - Stockholders' Equity

Exercise 10-12
Transaction
Issuecommonstock
Issuepreferredstock
Purchasetreasurystock
Saleoftreasurystock
Declarecashdividend
Paycashdividend
100%stockdividend
2for1stocksplit

Total
Assets
+
+

+
NE

NE
NE

Total
Liabilities
NE
NE
NE
NE
+

NE
NE

Total
Stockholders
Equity
+
+

NE
NE
NE

Exercise 10-13
UnitedApparel
BalanceSheet
(StockholdersEquitySection)
December31,2012
Stockholdersequity:
Preferredstock
Commonstock
Additionalpaidincapital
Totalpaidincapital
Retainedearnings
Treasurystock
Totalstockholdersequity

$2,600,000
500,000
7,800,000
10,900,000
1,700,000
(750,000)
$11,850,000

10-24

Chapter 10 - Stockholders' Equity

Exercise 10-14
Requirement 1

($inmillions)
LimitedBrands

Average
NetIncome StockholdersEquity =
($2,219+1,874)/2 =
$220

Returnon
Equity
10.8%

Limited Brands has a lower return on equity than Deckers Outdoor, but a higher return
on equity than Timberland.
Requirement 2

($inmillions)
LimitedBrands

NetIncome

$220

MarketValue
ofEquity
($7.92x321)

=
=

Returnonthe
MarketValue
ofEquity
8.7%

Limited Brands also has a lower return on the market value of equity than Deckers
Outdoor, but a higher return on the market value of equity than Timberland..
Requirement 3
($inmillions)
LimitedBrands

NetIncome

$220

SharesOutstanding
321

= EarningsperShare
=
$0.69

Limited Brands has earnings per share of $0.69. Earnings per share is not useful for
comparing earnings performance between companies because of wide differences in
the number of shares outstanding. It is useful in comparing earnings for one company
over time.
Requirement 4
($inmillions)
LimitedBrands

StockPrice

$7.92

EarningsPerShare
$0.69

=
=

PriceEarnings
Ratio
11.5

Limited Brands has a slightly higher price-earnings ratio than Deckers Outdoor and a
much lower price-earnings ratio than Timberland.

10-25

Chapter 10 - Stockholders' Equity

10-26

Chapter 10 - Stockholders' Equity

Exercise 10-15
Requirement 1
($in
millions)
2011
2012

NetIncome
Dividendson
PreferredStock
($180$20)
($210$25)

Shares
Outstanding =

220
=

240
=

Earningsper
Share
$0.73
$0.77

Earnings per share increased from $0.73 per share to $0.77 per share.
Requirement 2
($inmillions)
2011
2012

StockPrice

$10.47

$11.52

EarningsPerShare
$0.73
$0.77

=
=
=

The stock is priced lower in relation to reported earnings in 2011.

10-27

PriceEarnings
Ratio
14.3
15.0

Chapter 10 - Stockholders' Equity

PROBLEMS: SET A
Problem 10-1A
Terms
__f___ 1.Cumulative
__d__
2.Retainedearnings
__g__
3.Outstandingstock
__h__
4.Limitedliability
__j__
5.Treasurystock
__e__
6.Issuedstock
__i__7.Angelinvestors
__a__8.Paidincapital
__b__
9.Authorizedstock
__c__10.Redeemable
Definitions
a. Theamountinvestedbystockholders.
b. Sharesavailabletosell.
c. Sharescanbereturnedtothecorporationatapredeterminedprice.
d. Theearningsnotpaidoutindividends.
e. Sharesactuallysold.
f. Sharesreceivepriorityforfuturedividendsifdividendsarenotpaidinagiven
year.
g. Shares held by investors.
h. Shareholderscanlosenomorethantheamounttheyinvestedinthecompany.
i. Wealthyindividualsinthebusinesscommunitywillingtoriskinvestment
fundsonapromisingbusinessventure.
j. Thecorporationsownstockthatitreacquired.

10-28

Chapter 10 - Stockholders' Equity

Problem 10-2A
Requirement 1
March1,2012
Cash(1,000x$32)
CommonStock(1,000x$0.01)
AdditionalPaidinCapital(difference)
(Issuecommonstock)
May15,2012
TreasuryStock(600sharesx$25)
Cash
(Purchasetreasurystock)

Debit
32,000

Credit
10
31,990

15,000
15,000

July10,2012
Cash(100sharesx$30)
TreasuryStock(100sharesx$25)
AdditionalPaidinCapital(100x$5)
(Reissuetreasurystockabovecost)
October15,2012
Cash(100x$35)
PreferredStock(100x$1)
AdditionalPaidinCapital(difference)
(Issuepreferredstock)
December1,2012
Dividends(3,800sharesx$0.75)
DividendsPayable
(Declarecashdividends)

3,000
2,500
500

3,500
100
3,400

2,850
2,850

December31.2012
DividendsPayable(3,800sharesx$0.75)
Cash
(Paycashdividends)

10-29

2,850
2,850

Chapter 10 - Stockholders' Equity

Requirement2

Transaction
Issuecommonstock
Purchasetreasurystock
Reissuetreasurystock
Issuepreferredstock
Declarecashdividends
Paycashdividends

Total
Assets
+

+
+
NE

Total
Liabilities
NE
NE
NE
NE
+

Total
Stockholders
Equity
+

+
+

NE

Problem 10-3A
Requirement1

Commonstock,$1parvalue
Additionalpaidincapital
Totalpaidincapital
RetainedEarnings
Totalstockholdersequity
Sharesoutstanding
Parvaluepershare
Shareprice

Before
$1,000
49,000
50,000
22,850
$72,850

After100%
StockDividend
$2,000
49,000
51,000
21,850
$72,850

After2for1
StockSplit
$1,000
49,000
50,000
22,850
$72,850

1,000
$1.00
$110

2,000
$1.00
$55

2,000
$0.50
$55

Requirement 2
The primary reason companies declare a large stock dividend or a stock split is to
lower the trading price of the stock to a more acceptable trading range, making it
attractive to a larger number of potential investors.

10-30

Chapter 10 - Stockholders' Equity

Problem 10-4A
Requirement 1
5,000,000 shares = ($5,000 / $1 par value per share) in thousands (x 1,000).
Requirement 2
20,000,000 shares = ($20,000 / $1 par value per share) in thousands (x 1,000).
Requirement 3
$40 per share. The total paid-in capital for common stock is $400,000 (20,000 x
$20). Therefore, the total paid-in capital for preferred stock must be $200,000
($600,000 - $400,000). $200,000 divided by 5,000 shares indicates an issue price
of $40 per share.
Requirement 4
(in millions)
Retained Earnings, Beginning

$240

+ Net Income

- Dividends

(20)

= Retained Earnings, Ending

$278

Net income for the year was $58 million.

Requirement 5
$22 per share. ($220,000 / 10,000 shares)

10-31

Chapter 10 - Stockholders' Equity

Problem 10-5A
Requirement1
DonnieHilfiger
BalanceSheet
(StockholdersEquitySection)
December31,2012
Stockholdersequity:
Preferredstock,$1parvalue
Commonstock,$0.01parvalue
Additionalpaidincapital
Totalpaidincapital
Retainedearnings
Treasurystock,5,000shares
Totalstockholdersequity

$300
40
101,890
102,230
32,450
(12,500)
$122,180

Requirement2

DonnieHilfiger
StatementofStockholdersEquity
FortheYearEndedDecember31,2012
Additional
Total
Preferred Common Paidin Retained Treasury Stockhold
Stock
Stock
Capital Earnings Stock
Equity
Balance,January1
Issuedcommonstock
Purchaseoftreasurystock
Saleoftreasurystock
Issuedpreferredstock
Cashdividends
Netincome
Balance,December31

200

30
10

66,000
31,990
500
3,400

100
$300

40

10-32

101,890

25,500

0
(15,000)
2,500

(2,850)
9,800
32,450 (12,500)

91,
32,
(15,
3,
3,
(2,
9,
$122,

Chapter 10 - Stockholders' Equity

Requirement3
Items1and2aresimilarinthatitem1showstheequitybalancesinacolumn
formatanditem2showsthesesamebalancesacrossthebottomrow.However,
items1and2servedifferentpurposes.Thestockholdersequitysectionofthe
balancesheetinitem1presentsthebalanceofeachequityaccountatapointin
time.Thestatementofstockholdersequityinitem2showsthechangeineach
equityaccountbalanceovertime.

10-33

Chapter 10 - Stockholders' Equity

Problem 10-6A
Requirement1
January2,2012
Cash(100,000x$60)
CommonStock(100,000x$1)
AdditionalPaidinCapital(difference)
(Issuecommonstockabovepar)
February14,2012
Cash(50,000x$11)
PreferredStock(50,000x$10)
AdditionalPaidinCapital(difference)
(Issuepreferredstockabovepar)
May8,2012
TreasuryStock(10,000sharesx$50)
Cash
(Purchasetreasurystock)
May31,2012
Cash(5,000sharesx$55)
TreasuryStock(5,000sharesx$50)
AdditionalPaidinCapital(5,000x$5)
(Reissuetreasurystockabovecost)
December1,2012
Dividends(95,000sharesx$0.50+$25,000)
DividendsPayable
(Declarecashdividends)
December30,2012
DividendsPayable
Cash
(Paycashdividends)

Debit
6,000,000

Credit
100,000
5,900,000

550,000
500,000
50,000

500,000
500,000

275,000
250,000
25,000

72,500
72,500

72,500
72,500

10-34

Chapter 10 - Stockholders' Equity

Requirement2
MajorLeagueApparel
BalanceSheet
(StockholdersEquitySection)
December31,2012
Stockholdersequity:
Preferredstock,$10parvalue
Commonstock,$1parvalue
Additionalpaidincapital
Totalpaidincapital
Retainedearnings
Treasurystock,5,000shares
Totalstockholdersequity

$500,000
100,000
5,975,000
6,575,000
407,500*
(250,000)
$6,732,500

*$480,000netincomeminus$72,500individends.

10-35

Chapter 10 - Stockholders' Equity

Problem 10-7A
Requirement 1

($inmillions)
Abercrombie

Net
Income
$272

Average
=
StockholdersEquity
($1,619+1,845)/2 =

Returnon
Equity
15.7%

Abercrombie has a lower return on equity than Deckers Outdoor, but a higher return
on equity than Timberland.
Requirement 2

($inmillions)
Abercrombie

Net
Income
$272

MarketValue
ofEquity
($29.00x103)

=
=

Returnonthe
MarketValue
ofEquity
9.1%

Abercrombie has a higher return on market value of equity than either Deckers
Outdoor (8.9%) or Timberland (3.7%).
Requirement 3
The return on the market value of equity is much lower than the return on equity
for these companies because the market value of equity is much higher than average
stockholders equity recorded on the balance sheet. For some companies the return on
equity is a meaningful measure of earnings performance; but for others, the return on
the market value of equity is a better measure, especially when the recorded balance in
stockholders equity and the market value of equity differ greatly.
Requirement 4
($inmillions)
Abercrombie

Stock
Price
$29.00

EarningsPerShare =

($272/103)

10-36

PriceEarnings
Ratio
11.0

Chapter 10 - Stockholders' Equity

Abercrombie has a slightly lower price-earnings ratio than Deckers Outdoor and a
much lower price-earnings ratio than Timberland. Abercrombie is trading at a lower
price per dollar of earnings. Problems: Set B

Problem 10-1B
Terms
__e___ 1.PEratio
__i___ 2.Stockholdersequitysectionofthebalancesheet
__a___3.Accumulateddeficit
__b___4.Growthstocks
__c___5.100%stockdividend
__f___6.Statementofstockholdersequity
__j___ 7.Treasurystock
__g___ 8.Valuestocks
__h___ 9.Returnonequity
__d___10.Retainedearnings
Definitions
a. Adebitbalanceinretainedearnings.
b. Pricedhighinrelationtocurrentearningsasinvestorsexpectfutureearnings
tobehigher.
c. Effectivelythesameasa2for1stocksplit.
d. Theearningsnotpaidoutindividends.
e. Thestockpricedividedbyearningspershare.
f. Summarizesthechangesinthebalanceineachstockholdersequityaccount
overaperiodoftime.
g. Pricedlowinrelationtocurrentearnings.
h. Measurestheabilityofcompanymanagementtogenerateearningsfromthe
resourcesthatownersprovide.
i. Showsthebalanceineachequityaccountatapointintime.
j. Thecorporationsownstockthatitreacquired.

10-37

Chapter 10 - Stockholders' Equity

Problem 10-2B
Requirement 1
March1,2012
Cash(2,000x$15)
CommonStock(2,000x$1.00)
AdditionalPaidinCapital(difference)
(Issuecommonstock)
April1,2012
Cash(200sharesx$30)
PreferredStock(200sharesx$10)
AdditionalPaidinCapital(difference)
(Issuepreferredstock)
June1,2012
Dividends(4,300sharesx$0.50)
DividendsPayable
(Declarecashdividends)

Debit
30,000

Credit
2,000
28,000

6,000
2,000
4,000

2,150
2,150

June30,2012
DividendsPayable(4,300sharesx$0.50)
Cash
(Paycashdividends)
August1,2012
TreasuryStock(200sharesx$12)
Cash
(Repurchasetreasurystock)

2,150
2,150

2,400
2,400

October1,2012
Cash(100sharesx$14)
TreasuryStock(100sharesx$12)
AdditionalPaidinCapital(100sharesx$2)
(Reissuetreasurystockabovecost)

10-38

1,400
1,200
200

Chapter 10 - Stockholders' Equity

Requirement2

Transaction
Issuecommonstock
Issuepreferredstock
Declarecashdividends
Paycashdividends
Purchasetreasurystock
Reissuetreasurystock

Total
Assets
+
+
NE

Total
Liabilities
NE
NE
+

NE
NE

Total
Stockholders
Equity
+
+

NE

Problem 10-3B

Commonstock,$0.01parvalue
Additionalpaidincapital
Totalpaidincapital
RetainedEarnings
Totalstockholdersequity
Sharesoutstanding
Parvaluepershare
Shareprice

Before
$10
24,990
25,000
15,000
$40,000

After100%
StockDividend
$20
24,990
25,010
14,990
$40,000

After2for1
StockSplit
$10
24,990
25,000
15,000
$40,000

1,000
$0.01
$82

2,000
$0.01
$41

2,000
$0.005
$41

10-39

Chapter 10 - Stockholders' Equity

Problem 10-4B
Requirement 1
No preferred stock has been issued.
Requirement 2
3,000,000 shares = ($15,000 / $5 par value per share) in thousands (x 1,000).
Requirement 3
$20 per share. The total paid-in capital for common stock is $60,000. $60,000
divided by 3,000 shares indicates an issue price of $20 per share.
Requirement 4
Retained Earnings, Beginning

$40,000,000

+ Net Income

10,850,000

- Dividends

= Retained Earnings, Ending

$48,000,000

Dividends paid for the year were $2,850,000.

Requirement 5
150,000 shares = ($2,700 / $18 per share) in thousands (x 1,000).
Requirement 6
$2,850,000 / (3,000,000 150,000) = $1.00 dividend per share.

10-40

Chapter 10 - Stockholders' Equity

Problem 10-5B
Requirement1
Nautical
BalanceSheet
(StockholdersEquitySection)
December31,2012
Stockholdersequity:
Preferredstock,$10parvalue
Commonstock,$1.00parvalue
Additionalpaidincapital
Totalpaidincapital
Retainedearnings
Treasurystock,100shares
Totalstockholdersequity

$3,000
4,000
50,700
57,700
15,500
(1,200)
$72,000

Requirement2
Nautical
StatementofStockholdersEquity
FortheYearEndedDecember31,2012
Additional
Preferred Common
Paidin
Retained
Stock
Stock
Capital
Earnings
Balance,January1
Issuedcommonstock
Issuedpreferredstock
Cashdividends
Purchasetreasurystock
Reissuetreasurystock
Netincome
Balance,December31

$1,000
2,000

$2,000
2,000

$18,500
28,000
4,000

$10,500

(2,150)
200
$3,000

$4,000

10-41

$50,700

Treasury
Stock
$0

(2,400)
1,200

7,150
$15,500 $(1,200)

Total
Stockholders
Equity
$32,000
30,000
6,000
(2,150)
(2,400)
1,400
7,150
$72,000

Chapter 10 - Stockholders' Equity

Requirement3
Items1and2aresimilarinthatitem1showstheequitybalancesinacolumn
formatanditem2showsthesesamebalancesacrossthebottomrow.However,
items1and2servedifferentpurposes.Thestockholdersequitysectionofthe
balancesheetinitem1presentsthebalanceofeachequityaccountatapointin
time.Thestatementofstockholdersequityinitem2showsthechangeineach
equityaccountbalanceovertime.

10-42

Chapter 10 - Stockholders' Equity

Problem 10-6B
Requirement1
February2,2012
Cash(1,000,000x$25)
CommonStock(1,000,000x$5)
AdditionalPaidinCapital(difference)
(Issuecommonstockabovepar)
February4,2012
Cash(500,000x$22)
PreferredStock(500,000x$20)
AdditionalPaidinCapital(difference)
(Issuepreferredstockabovepar)
June15,2012
TreasuryStock(100,000sharesx$20)
Cash
(Purchasetreasurystock)

Debit
25,000,000

Credit
5,000,000
20,000,000

11,000,000
10,000,000
1,000,000

2,000,000
2,000,000

August15,2012
Cash(75,000sharesx$35)
TreasuryStock(75,000sharesx$20)
AdditionalPaidinCapital(75,000x$15)
(Reissuetreasurystockabovecost)
November1,2012
Dividends(975,000sharesx$1.00+$600,000)
DividendsPayable
(Declarecashdividends)
November30,2012
DividendsPayable
Cash
(Paycashdividends)

2,625,000
1,500,000
1,125,000

1,575,000
1,575,000

1,575,000
1,575,000

10-43

Chapter 10 - Stockholders' Equity

Problem 10-6B (Continued)

Requirement2
NationalLeagueGear
BalanceSheet
(StockholdersEquitySection)
December31,2012
Stockholdersequity:
Preferredstock,$20parvalue
Commonstock,$5parvalue
Additionalpaidincapital
Totalpaidincapital
Retainedearnings*
Treasurystock,25,000shares
Totalstockholdersequity

$10,000,000
5,000,000
22,125,000
37,125,000
3,225,000
(500,000)
$39,850,000

*$4,800,000netincomeminus$1,575,000individends.

10-44

Chapter 10 - Stockholders' Equity

Problem 10-7B
Requirement 1

($inmillions)
Gap

Net
Income
$967

Average
StockholdersEquity =

($4,274+4,387)/2

Returnon
Equity
22.3%

Gap has a lower return on equity than Deckers Outdoor, but a higher return on equity
than Timberland.
Requirement 2

($inmillions)
Gap

Net
Income
$967

MarketValue
ofEquity
($16.00x694)

=
=

Returnonthe
MarketValue
ofEquity
8.7%

Gap also has a lower return on the market value of equity than Deckers Outdoor, but a
higher return on the market value of equity than Timberland.
Requirement 3
The return on the market value of equity is much lower than the return on equity
for these companies because the market value of equity is much higher than average
stockholders equity recorded on the balance sheet. For some companies the return on
equity is a meaningful measure of earnings performance; but for others, the return on
the market value of equity is a better measure, especially when the recorded balance in
stockholders equity and the market value of equity differ greatly.
Requirement 4
($inmillions)
Gap

StockPrice

$16.00

EarningsPerShare
($967/694)

=
=

PriceEarnings
Ratio
11.5

Gap has a slightly higher price-earnings ratio than Deckers Outdoor and a much lower
price-earnings ratio than Timberland. Deckers Outdoor is trading at a lower price per
dollar of earnings.

10-45

Chapter 10 - Stockholders' Equity

ADDITIONAL PERSPECTIVES
Continuing Problem: Great Adventures
AP10-1
Requirement1
July2,2014
Cash(100,000x$12)
CommonStock(100,000x$1)
AdditionalPaidinCapital(difference)
(Issuecommonstockabovepar)
September10,2014
TreasuryStock(10,000sharesx$15)
Cash
(Purchasetreasurystock)
November15,2014
Cash(5,000sharesx$16)
TreasuryStock(5,000sharesx$15)
AdditionalPaidinCapital(5,000x$1)
(Reissuetreasurystockabovecost)
December1,2014
Dividends
DividendsPayable
(Declarecashdividends)

Debit
1,200,000

Credit
100,000
1,100,000

150,000
150,000

80,000
75,000
5,000

115,000
115,000

December31,2014
DividendsPayable
Cash
(Paycashdividends)

115,000
115,000

10-46

Chapter 10 - Stockholders' Equity

Requirement2
GreatAdventures,Inc.
BalanceSheet
(StockholdersEquitySection)
December31,2014
Stockholdersequity:
Commonstock,$1parvalue
Additionalpaidincapital
Totalpaidincapital
Retainedearnings*
Treasurystock,5,000shares
Totalstockholdersequity

$120,000
1,105,000
1,225,000
175,000
(75,000)
$1,325,000

*$140,000beginningbalanceinretainedearningsplus$150,000netincome
minus$115,000individends.

10-47

Chapter 10 - Stockholders' Equity

Financial Analysis: American Eagle

AP10-2
Requirement 1
$0.01 par value per share. The par value per share is listed in the stockholders
equity section of the balance sheet.
Requirement 2
249,561,000 shares. The number of shares issued (in thousands) is listed in the
stockholders equity section of the balance sheet.
Requirement 3
Yes, 41,737,000 shares. The number of shares of treasury stock (in thousands) is
listed in the stockholders equity section of the balance sheet.
Requirement 4
$83,906,000. The cash dividends paid (in thousands) is listed in the retained
earnings column near the bottom of the statement of stockholders equity.

10-48

Chapter 10 - Stockholders' Equity

Financial Analysis: The Buckle

AP10-3
Requirement 1
$0.01 par value per share. The par value per share is listed in the stockholders
equity section of the balance sheet.
Requirement 2
46,381,263 shares. The number of shares issued (in thousands) is listed in the
stockholders equity section of the balance sheet.
Requirement 3
No. There is no treasury stock reported in the stockholders equity section of the
balance sheet.
Requirement 4
$120,341,000. The cash dividends paid ($37,011 + $83,330 in thousands) is listed
in the retained earnings column of the statement of stockholders equity.
Requirement 5
Yes, the company had a 3-for-2 stock split in the year ended January 31, 2009
according to the statement of stockholders equity. Additional details are provided
in footnote A regarding the summary of significant accounting policies.
Specifically, On September 15, 2008, the Companys Board of Directors approved
a 3-for-2 stock split payable in the form of a stock dividend for shareholders of
record as of October 15, 2008, with a distribution date of October 30, 2008.

10-49

Chapter 10 - Stockholders' Equity

Comparative Analysis: American Eagle vs. The Buckle

AP10-4
Requirement 1
($inthousands)

Net
Income

AmericanEagle
$169,022
TheBuckle
$127,303
*($1,409,031 + $1,578,517) / 2
**($337,222 + $354,259) / 2

Average
Stockholders =
Equity

$1,493,774*
$345,741**

Returnon
Equity

=
=

11.3%
36.8%

The Buckle has a higher return on equity than American Eagle.

Requirement 2
($inthousands)

NetIncome

AmericanEagle
TheBuckle

$169,022
$127,303

MarketValue
ofEquity

$15.89x206,832
$30.34x46,381

=
=

Returnonthe
MarketValue
ofEquity
5.1%
9.0%

The Buckle also has a higher return on market value of equity than American Eagle.
Note that since net income amounts are in thousands, the number of shares
outstanding used in calculating the market value of equity also needs to be in
thousands.
Requirement 3
The return on the market value of equity is much lower than the return on equity for
both companies because the market value of equity is much higher than average
stockholders equity recorded on the balance sheet. For some companies the return on
equity is a meaningful measure of earnings performance; but for others, the return on
the market value of equity is a better measure, especially when the recorded balance in
stockholders equity and the market value of equity differ greatly.

10-50

Chapter 10 - Stockholders' Equity

Requirement 4
($inthousands)
AmericanEagle
TheBuckle

StockPrice
$15.89
$30.34

EarningsPerShare

PriceEarnings
Ratio

($169,022/206,832)
(127,303/46,381)

=
=

19.4
11.1

The Buckle is trading at a lower price per dollar of earnings than American Eagle.

10-51

Chapter 10 - Stockholders' Equity

Ethics
AP10-5
Answers regarding the allocation of the additional $5 million in operating cash flows
will vary. Other areas to spend the money, not specifically mentioned in the case,
include increasing employee benefits such as retirement and healthcare, investing in
research and development to continue the successful launch of new products,
investing in other companies to gain access to resources or technology, and giving to
charity.
It is common for executives to be compensated based on the companys
performance each year. This in itself is not unethical and often is a good business
practice. However, when executive compensation is related to company performance,
users need to be aware that this increases the risk of earnings management to meet
management incentives.

10-52

Chapter 10 - Stockholders' Equity

Internet Research
AP10-6

10-53

Chapter 10 - Stockholders' Equity

This case provides an opportunity for students to learn more about Form 10-K,
containing the annual report for publicly traded companies. It also introduces students
to EDGAR, one of the largest sources of accounting information available on the
internet. Finally, students gain an understanding of transactions that affect the
statement of stockholders equity. Answers to the assignment will vary depending on
the 10-K filing chosen. Written Communication

AP10-7
Requirement1
Liabilitiesarethecreditorsclaimstoresources.Stockholdersequityaretheowners
claimtoresources.
Requirement2
Thebalancesheethasalwaysdistinguishedbetweenliabilitiesandstockholders
equity.Financialaccountinginformationisdesignedtoprovideinformationusefulto
itstwoprimaryusergroups,investorsandcreditors.Therefore,itmakessenseto
separatetheownersclaimtoresourcesfromthecreditorsclaimtoresources.
Requirement3
Argumentsinsupportofeliminatingthedistinctionrelatetothedifficulty,incertain
cases,indistinguishingbetweenliabilitiesandstockholdersequity.Forinstance,
preferredstockcanbestructuredsothatitisnearlyidenticaltocommonstockby
givingpreferredstockvotingrightsandmakingitconvertibletocommonstockatthe
optionoftheinvestor.Ontheotherhand,preferredstockcanalsobestructuredsothat
itislikeabondwithafixeddividendpaymentandamandatoryredemptiondate
similartotheinterestpaymentandmaturitydateonbondspayable.Sincepreferred
stockcanfallanywherealongthelinebetweencommonstockandbonds,itbecomes
difficulttomaintainadistinctionbetweenliabilitiesandstockholdersequity.
Requirement4
Whileanswerstothisquestionwillvary,studentsshouldbeabletodefendtheir
position.

10-54

Chapter 10 - Stockholders' Equity

Earnings Management
AP10-8
Requirement 1

NetIncome
BeforeRepurchase
$878,000

Sharesoutstanding
950,000

=
=

Earnings
PerShare
$0.92

Average
Returnon
=
NetIncome
StockholdersEquity
Equity
BeforeRepurchase
$878,000 ($4,425,000+4,000,000)/2 =
20.8%

Requirement 2

Sharesoutstanding
(950,000+850,000)/2

Earnings
PerShare
$0.98

AfterRepurchase

NetIncome
$878,000

AfterRepurchase

Average
Returnon
=
NetIncome
StockholdersEquity
Equity
$878,000 ($4,425,000+3,000,000)/2 =
23.6%

Requirement 3
The repurchase of stock near year-end improves earnings per share by reducing the
number of outstanding shares used to calculate earnings per share. It also improves the
return on equity by reducing the ending balance in stockholders equity. Note that it
will be difficult to maintain next year as the reduction in shares outstanding and
average stockholders equity comes at a cost the increase in interest expense
beginning next year due to the $1 million loan at year-end. The loan also increases
company risk.

10-55

Chapter 10 - Stockholders' Equity

10-56