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Question 1

what rights do CS owners have?

Answer 1

• right to vote
• share in earnings
• share in assets upon liquidation AFTER claims of creditors and PS owners

Question 2

how is common SE calc’d?

Answer 2

total SE
(greater of call/par)

= common SE

Question 3

how is BV per common share calc’d?

Answer 3

common SE
/ common sh’s O/S
(issued - repurch)

Question 4

what is cumu PS?

Answer 4

all/part of PD not paid in any year accu’s and must be paid in future before div’s can be paid to CS owners

..aka div’s in arrears (not a legal liability)

*must be disclosed in total per share basis in BS or notes

Question 5

what is noncumu PS?

Answer 5

div’s not paid in any year does not accu.

..PS owners lose right to receive div’s not declared

Question 6

what is participating PS?

Answer 6

• share equally (%), then pro rata
• fully participating = PS owners participate in excess div’s w/o limit
• partially participating = PS owners participate in excess earnings but to a limit

Question 7

what are non-participating PS?

Answer 7

PS owners limited to only div’s provided by their pref. (no share of excess div’s)

Question 8

what is mandatorily redeemable PS?

Answer 8

it is a liability PS issued with a maturity date

Question 9

what is the JE when an appropriation of RE is made?

Answer 9

Dr: RE unapprop’d
Cr: RE approp’d for (x)

Question 10

what are the JE’s for TS cost method? (G/L occurs at reissuance)

Answer 10

issuance:
Dr: cash (SP)
Cr: CS (par)
Cr: APIC (plug)

repurch:
Dr: TS (cost)
Cr: cash

reissue above cost:
Dr: cash (SP)
Cr: TS (cost)
Cr: APIC-TS (gain/plug)

reissue below cost:
Dr: cash (SP)
Dr: APIC-TS (reduce to 0)
Dr: RE (plug - total loss)
Cr: TS (cost)

Question 11

what are the JE’s for TS par method? (G/L calc’d upon repurch)

Answer 11

issuance:
Dr: cash (SP)
Cr: CS (par)
Cr: APIC (plug/par)

repurch above SP:
Dr: TS (CS par)
Dr: APIC-CS (par)
Dr: RE (SP-repurch * shares)
Cr: cash (PP)

repurch below SP:
Dr: TS (CS par)
Dr: APIC-CS (par)
Cr: cash (PP)
Cr: APIC-TS (SP - PP * sh's)

reissue shares (above/below irrelevant)
Dr: cash (SP)
Cr: TS (CS par)
Cr: APIC-CS (plug)

Question 12

what are the diff’s b/w cost and par method on BS?

Answer 12

• cost: TS subtracted after RE
• par: TS subtracted after CS

…bottom line SE still same

Question 13

what are the JE’s for retirement of TS under cost and par method?

Answer 13

*cost:
Dr: CS (par)
Dr: APIC (SP - par)
Dr: RE (plug)
Cr: TS (cost)

*par:
Dr: CS (par)
Cr: TS (CS par)

Question 14

what is the JE for donated TS? (at FMV)

Answer 14

Dr: donated TS
Cr: APIC

… NC in SE

*if donated TS is sold:
Dr: cash (SP)
Dr: APIC (if SP < FMV)
Cr: APIC (if SP > FMV)
Cr: donated TS (FMV)

Question 15

what happens when TS is sold/purch’d?

Answer 15

sold = CS O/S increases

purch’d = CS O/S decreases

Question 16

can RE approp. be used to restrict earnings avail. for div’s?

Answer 16

yes, and doing so will not affect the I/S

Question 17

how is retail inv. method calc’d?

Answer 17

*cost-retail ratio
= COGAFS cost/ COGAFS retail

*cost-retail ratio * cost EI
= retail EI

Question 18

what happens when stock is issued below par?

Answer 18

APIC would be Dr’d to reflect a discount on stick

*discount represents a cont. L to original owners

Question 19

what is a stock subscription?

Answer 19

an agreement to sell a # of shares at an agreed-upon price on Cr

*upon full pmt, stock cert. evidence is issued

Question 20

what is the JE for sale of subscriptions?

no cash rec’d yet

Answer 20

Dr: sub’s rec. (contra-equity)
Cr: CS subscribed
Cr: APIC

(NC in SE)

Question 21

what is the JE for collection of subscriptions and issuance of stock prev’ly sub’d?

Answer 21

Dr: cash
Cr: sub’s rec.

(A and E up)

Dr: CS sub’d
Cr: CS (issued)