Chapter 7 first part Flashcards
When do you decrease RE on stock dividends?
The date it is declared
What is the purpose of a quasi-reorganization?
It is to eliminate a retained earnings deficit so that future earnings will be available for dividends rather than limited to offsetting the retained earnings deficit.
What is a liquidating dividend?
The mount in excess of retained earnings balance
How is property dividend recorded?
Market value at date of declaration.
What event is treated as if it had occurred at the beging of the year when determining EPS?
Declaration and distribution of stock dividend
When computing weighted average of common shares outstand for basic eps, how are convertible sercuites recognized? If recongonized
They aren’t they are ignored
Is a stock split of dividend recognoized in the statements even if it happens happens after year end?
Yes both are
How is interest expense treated when determining EPS?
Added back to net income for diluted earnings per share, and ignored for basic earnings per share.
When determining EPS what do you do with perfered stock dividends?
You subtract them from Net income before using net income to calculate EPS.
What is the calculation for the numerator of dilutive EPS?
Income available to common shareholders + Interest of Dilutive securities.
A dilutive security will produce an earnings per share number below basic earnings per share. How would you calculate this?
Determine if the security will result in a lower EPS number.
Who is required to present EPS on their finanacials?
All public entites must present EPS on their income statement.
How would you calculate the additional shares outstanding using the treasury stock method?
Number of share -[(Shares x exercise price) / Average Market Price]
How is income available to common shareholders determined?
Deduct dividends declared in the period on non-cumulative preferred stock (regardless of weather they have been paid) and dividends accumulated in the period on cumulative preferred stock (Regardless of weather they have been declared).
