Financial Accounting: An Integrated Statements Approach, 2nd Edition

As can be seen, Amazon.com has accumulated deficits during its complete life as a public com-

pany. Below is the Liabilities and Stockholders’ Equity section of Amazon.com’s December 31,

2004, balance sheet.

Current liabilities $ 1,252,701

Long-term liabilities 1,945,439

Paid-in capital 1,903,403

Accumulated deficit (2,974,428)

Total stockholders’ equity $(1,071,025)

Total liabilities and stockholders’ equity $ 2,127,115

a. Would you expect Amazon.com to be paying a dividend?

b. Go to Yahoo Finance at finance.yahoo.com and determine the current market value of

Amazon.com from the Amazon quotes and information page. Type AMZN in the blank

indicated by “Get Quotes.” Explain the difference between the total stockholders’ equity

shown on the balance sheet and the market valuation.

c. Where does Amazon.com obtain the funds to stay in business?

a. What is the par value of the common stock? Round to the nearest dollar.

b. How much did employees pay per share for common stock under the option plan?

Round to the nearest cent.

c. Record the entry for the common stock issuance under the option plan. (Hint:The

issuance is recorded as illustrated in the text for a common stock issuance.)

d. Record the summary entry for the dividends declared during the year.

e. Does the dividend seem sustainable?

The following chart shows the retained earnings (deficits) balance for Amazon.com, Inc., from

its initial public offering date until December 31, 2004:

530 Chapter 11 Stockholders’ Equity: Capital Stock and Dividends

$3,500,000

$3,000,000

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$500,000

$0

Accumulated Deficits—Amazon.com (in thousands)

December 31,

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Case 11-6

Capitalizing a development

stage company