Lesson: 52

Topic: Types of Corporations and Share Considerations

Objectives:

Students will come to understand the various types of corporations. Types or corporations examined will include:

• public,
• private, and
• not-for-profit).

Students will also come to understand three specific share considerations. These include:

• par value,
• no-par value, and
• stated value.

In addition, students will also come to understand how these considerations are reflected on the shareholder's equity section of the balance sheet.

Finally, students will come to understand the following concepts related to corporate shares:

• board of directors (elected
• annual meeting
• pre-emptive right (keep the same % of ownership if new shares are issued; very rare)
• contributed capital
• contributed capital in excess of par / stated value
• residual claim (upon liquidation, claim to remaining corporate assets after creditors are paid)
• retained earnings (cumulative net income of corporation that has not been distributed to shareholders)

Method of Instruction and Evaluation Exercise:

After a Socratic lesson guided by the PowerPoint entitled Corporations: Organization and Share Capital Transactions, students will complete the following textbook exercises:

	E13-3
	This exercise will be taken up in class and students will compare their work with the exemplar. Students will then discuss any points of confusion with the teacher and with each other, and students will make any necessary corrections to their work.

Expectations Addressed:

The expectations addressed by this lesson have been highlighted below.

Strand 3: Partnerships and Corporations

Partnerships

By the end of this course, students will:

– explain the differences between limited and general partnerships;
– record transactions relating to partnerships, including formation, admission of a new partner, retirement of a current partner, and dissolution;
– record the distribution of income among partners;
– prepare the partnership equity section of the balance sheet.

Corporations

By the end of this course, students will:

– describe types of corporations (e.g., public, private, not-for-profit) and classes of shares (e.g., common, preferred, voting);
– record transactions related to common and preferred stocks (e.g., issue, buy back, subscriptions);
– record transactions related to the declaration and distribution of dividends;
– compare the impact of various forms of dividend distribution (e.g., cash dividends, stock dividends, stock splits) on shareholders’ equity;
– prepare the financial statements for a corporation, including an income statement, a statement of retained earnings, and the shareholders’ equity section of the balance sheet.

References:

• Text, Edition 3, Chapter #13, (Edition 2, Chapter 14, pages 652, and 656-663)
• PowerPoint: Corporations: Organization and Share Capital Transactions
• Edited PowerPoints:
  • Chapter 14
  • Chapter 15