Chapter 14 Flashcards
What are the 3 sections of equity?
- Capital
- Retained Earnings
- accumulated OCI
what is it called when you repurchase your own stock
Treasury Stock, debit on the balance sheet
if only one class of stock is issued, it is treated as what?
Common Stock
Define Mandatorily redeemable financial instruments
redeemable shares that embody an unconditional obligation to transfer assets at a fixed or determinable time or upon an event certain to occur. Recorded as liabilities.
Define Capital Stock
is the par (or stated value) of all shares issued and outstanding.
JE to record par value of stock
Dr. Cash
CR Common or preferred stock at par
CR Additional paid in capital (difference)
JE to record the direct costs of issuing stock
DR. Additional paid in capital
CR. Cash
Define Stock subscriptions
a contractual arrangement to sell a specified number of shares at a specified price at some future date.
JE for stock subscription
DR. Cash (down payment)
DR. AR (shares X market price X % not covered by down payment)
CR. Common stock (par value)
CR. Additional paid in capital (difference)
JE for stock issued for a service
DR. Service expense
CR. Common stock (at par)
CR. Additional paid in capital (difference)
Define Stock warrants
a right to purchase shares at a specified price within a specified period. Warrants are usually attached to other securities.
Define Preemptive Right
It is the right to purchase a pro rata amount of a new issuance of the same class of stock.
What do you do when rights are issued for no consideration.
only a memorandum is made
Under the cost method, treasury shares are reported at
their reacquisition price
Under the cost method, what is the JE for the reacquisition of treasury stock?
DR. Treasury Stock (equity)
CR Cash
What is the JE to record reacquisition of treasury stock under the par method?
DR. Treasury stock (par Value)
DR. APIC (excess)
DR. Retained earning (difference)
CR. Cash
What is the JE for the reissue of treasury stock using the cost method
DR. Cash (market)
CR. Treasury Stock (cost)
CR. PIC (difference)
What is the JE for the reissue of treasury stock using the Par method?
DR. Cash (market)
CR. Treasury Stock (par Value)
CR. PIC (difference)
What happens on a date of declaration.
A liability is booked
JE for dividend declaration
DR. Retained Earnings
CR. Dividend Payable
Are cumulative preferred dividends in arrears accrued for?
No they are only disclosed
What is the first thing you do with a property dividend
Revalue the property to fair value
What is the JE to book a property dividend after revaluation?
DR. Retained Earning (fair Value)
CR. Property dividend payable
JE for liquidating dividend declaration
DR. RE (first)
DR. APIC common stock (second)
CR. Dividends payable
An issuance of shares less than 20% to 25%
should be recognized as a stock dividend
An issuance of more than 20% to 25%
stock split
What is the JE for a stock split
No JE, just a memo
JE for stock dividend declared
DR. Retained earnings (market price)
CR. Common stock (at par)
CR. APIC (difference)
Does a stock split affect total equity?
no
if you received a stock dividend, do you book revenue?
no
Are stock dividends a liability?
no they are a reclassification of equity
JE for stock split in the form of a dividend
DR. Retained Earnings (par)
CR. Common stock distributable (par)
contributed capital of a partnership should be record at what?
Fair Value
Under the bonus method you do what when a partner leaves
reduce the other partners capital by the amount of unrecorded goodwill.
