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ACYFAR 4 > ACCOUNTING FOR SHAREHOLDERS' EQUITY > Flashcards

ACCOUNTING FOR SHAREHOLDERS' EQUITY Flashcards

1
Q

An artificial being, created by the operation of law, having the right
of succession, and the powers, attributes and properties exclusively authorized by law or incidental to its existence

A

Corporation

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2
Q

A document that contains information related to the
1. Name of the corporation
2. Purpose for which the corporation is found
3. Place where principal office of corporation is located
4. Term for which the corporation is to exist, names
5. Names, nationalities, and addresses of stakeholders
6. Amount of authorized capital stock, if stock corporation
7. Amount of capital, if non-stock corporation

A

Articles of Incorporation

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3
Q

Rules of action adopted by the corporation for its
internal regulations and for the government of its officers and of its stockholders
or members

A

By-Laws

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4
Q

Costs incurred in the formation of a corporation.

A

Organization Cost

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5
Q

What are included in organization costs and what is its treatment?

A

Include:
* Legal Fees
* Incorporation Fees
* Share Issuance Costs
Expensed immediately as incurred

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6
Q

Residual interest of owners in the net assets of a corporation by the
excess of assets over liabilities.

A

Shareholder’s Equity

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7
Q

Maximum amount of par value shares to be issued.

A

Authorized Capital Stock

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8
Q

Amount of capital stock subscribed whether fully paid or not.

A

Subscribed Share Capital

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9
Q

Portion of the capital stock which is issued and held by persons other
than the corporation itself. Composed of your issued shares, less any treasury
shares plus your subscribed shares. Also, represent the shares that are entitled to receive dividends.

A

Outstanding Shares

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10
Q

Portion of outstanding shares that have been fully paid. Consists of the par values of your fully issued shares.

A

Share Capital

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11
Q

This is the type of share capital that has no preference over each other and the reward is dependent on financial performance of entity. Enjoys voting rights, as well as Pre-Emptive Rights.

A

Ordinary Share Capital

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12
Q

Holders of these shares are given preference on dividends or net assets. Generally too not enjoy voting or pre-emptive rights. Has a fixed rate of dividends.

A

Preference Share Capital

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13
Q

This is the amount equal to the aggregate par value or issued value of
outstanding share capital. This is the minimum amount of corporate assets which are for the protection of corporate creditors, and may not be lawfully distributed to the shareholders.

A

Legal Capital

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14
Q

The excess of the amount paid over par value shares.

A

Share Premium

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15
Q

If noncash consideration was given for the issuance of shares, what is the order of priority of the amount issued?

A

a. Fair Value of the noncash consideration received
b. Fair Value of the shares issued
c. Par Value of the shares issued

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16
Q

If an existing shareholder were to donate additional property to the
business, then this would be a credit to _______?

A

Share Premium

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17
Q

These are issued shares that are being held by the corporation whether
due to repurchase or delinquency in the subscription. They are ignored in the
computation of legal capital and total contributed capital, as they are already
included in the issued shares.

A

Treasury Shares

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18
Q

What is the computation for Outstanding Shares?

A

Share Capital + Subscribed Share Capital - Treasury Shares

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19
Q

What is the minimum issuance price for no par-value shares?

A

5 pesos

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20
Q

Under Sec 66 of the Revised Corporation Code of the Philippines, the
board may at anytime make a call that would serve as a declaration that unpaid
subscriptions are due and payable on a fixed date. Failure to pay on such date
makes the shareholder liable for the unpaid balance and any interest computed
from the date specified until full payment. If the stockholder is unable to pay
within 30 days from said date, what will happen?

A

It is now a delinquent subscription and will be sold at a public auction.

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21
Q

Occurs when there is a change in the capital structure of the entity.

A

Recapitalization

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22
Q

What happens during the recapitalization in SHE?

A

Old shares are retired and then new shares are issued.

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23
Q

What are the five typical types of recapitalization?

A
  1. Change from par to no par
  2. Change from no par to par
  3. Reduction of par or stated value
  4. Split up
  5. Split down
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24
Q

What is the journal entry when there is a reduction of par or stated value?

A

Dr Share Capital
Cr Share Premium - Recapitalization

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25
Q

What happens to the no. of shares and the par value in a share split up?

A

No. of shares increase,
Par value decreases

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26
Q

What happens to the total share capital when there is recapitalization (any type of recapitalization)?

A

Nothing. It should be the same.

Note: It is just the structure that changes.

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27
Q

What happens to the no. of shares and the par value in a share split down?

A

No. of shares decrease,
Par value increases

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28
Q

Is quasi-reorganization a permissive or mandatory action?

A

Permissive

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29
Q

What prompts quasi-reorganization?

A

If there is a DEFICIT in the Retained Earnings.

30
Q

The other term for quasi reorganization?

A

Corporate Readjustment

31
Q

Who approves the quasi-reorganization?

A

Shareholders
Creditors
SEC

32
Q

The two ways to treat a deficit in the quasi-reorganization.

A

Through:
1. Revaluation (Dr RS)
2. Recapitalization (Dr SP)

33
Q

What is the measurement of the property dividend payable?

A

FV of the asset to be distributed

34
Q

What is the measurement of the NCA to be distributed in property dividends?

A

CA or FVLCTS (whichever is lower)

35
Q

If the FVLCTS is lower than the carrying amount of the noncash asset, what do you recognize?

A

Impairment Loss

36
Q

When do you remeasure the Property Dividend Payable?

A
  1. Balance Sheet Date
  2. Date of Settlement
37
Q

When do you remeasure the NCA to be distributed in a property dividend?

A
  1. Balance Sheet Date
38
Q

On the settlement of the property dividend payable, what is the instance where there is a gain on distribution?

A

If Property Dividend Payable > NCA held for Distribution

39
Q

On the settlement of the property dividend payable, what is the instance where there is a loss on distribution?

A

If Property Dividend Payable < NCA held for distribution

40
Q

What is the journal entry for cash dividend payable on the date of declaration?

A

RE xx
Cash Div Payable xx

41
Q

What is the journal entry for property dividend payable on the date of declaration?

A

RE xx
Property Div Payable xx

42
Q

Do share dividends have an effect on the total balance of the Shareholder’s Equity?

A

No

43
Q

What is considered a LARGE share dividend?

A

20% or more of outstanding shares

44
Q

What is considered a SMALL share dividend?

A

Less than 20% of the outstanding shares

45
Q

What is the journal entry in recognizing Share Dividends in general?

A

RE xx
Share Div Payable xx

46
Q

At what value is the Share Dividend Payable recorded at when it comes to LARGE Share Dividends?

A

At par

47
Q

At what value is the Share Dividend Payable recorded at when it comes to SMALL Share Dividends?

A

At FV or Par whichever is higher

48
Q

What is the journal entry in declaring LARGE Share Dividends?

A

RE xx
Share Div Payable (at par) xx
Share Premium xx

Note: if at par, no share premium.

49
Q

What type of account is Share Dividend Distributable?

A

Equity Account

50
Q

What is the journal entry for treasury shares once you acquired it?

A

Treasury Shares xx
Cash xx
RE xx
RE - appropriated xx

51
Q

Reissuance of treasury shares can be reissued below par. True or false?

A

True

52
Q

Treasury shares are measured at _______.

A

Cost

53
Q

If the Reissue Price of Treasury Shares > Cost, how will you record this?

A

Share Premium - Treasury Shares

54
Q

Is the Reissue Price of Treasury Shares < Cost, how will you record this?

A

Take it from this:

Order of Priority:
1. Share Premium - Treasury Shares
2. Retained Earnings

55
Q

In RETIREMENT of treasury shares, what will constitute a SP - Retirement?

A

Original Issue Price of Share Capital > Cost

56
Q

When you receive donated shares, how is this recognized?

A

Memo entry

57
Q

When you reissue donated shares, what is the journal entry?

A

Cash xx
SP - TS xx

58
Q

When you retire donated shares, what is the journal entry?

A

SC xx
SP xx
SP - TS xx

59
Q

On the issuance of a stock right, what entry should you put?

A

Memo entry

60
Q

What is a stock right?

A

The right of an existing shareholder to buy a certain number of extra shares in a company at a particular price

aka Pre-emptive Right

61
Q

On the expiry of a stock right, what is the entry?

A

Memo entry

62
Q

How do you solve for the loss on failure to exercise option?

A

Carrying Amount of Asset at the end of lease term
Less: Purchase Option Price
————————————————
Loss on failure to exercise option

63
Q

If residual value guarantee is related to the lessor, what sort of guarantee is this in the books of the lessee and what is the treatment?

A

Unguaranteed Residual Value

  • do not include in calculations
64
Q

How do you compute for total contributed capital?

A

All share capitals plus share premium.
Deduct subscriptions receivable

65
Q

Who is the highest bidder in terms of:

  1. Number of shares
  2. Par value
A
  1. Lowest number of shares
  2. Highest par value
66
Q

If there is a highest bidder, how much are the shares issued to the delinquent subscriber?

A

Total Subscribed Shares of delinquent
Less: Shares of the highest bidder
—————————————————–
= Shares Issued to the delinquent subscriber

67
Q

What should the highest bidder pay in delinquent shares?

A
  1. Subscription balance
  2. Expenses in relation to the public auction
  3. Accrued interest
68
Q

The allocations of having more than 1 share issuance is based on the _______?

A

Market Value

69
Q

How do you solve for legal capital?

A

All share capitals (Subscribed or fully paid) at par
*If no-par shares, include Share Premium.

70
Q

What is the journal entry for downpayment of subscribed shares?

A

Dr Cash
Cr Subscriptions Receivable

71
Q

In a share split up, what happens to the cost per acquisition of treasury shares?

A

Decrease

72
Q

In a share split down, what happens to the cost per acquisition of treasury shares?

A

Increase

ACYFAR 4 (8 decks)

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