Deck 18 Flashcards
Purpose of quasi reorganization:
Restate overvalued assets to their lower fair values and to eliminate a retained earnings deficit
Journal entry to eliminate deficit in retained earnings
Dr. C/S; Cr. Retained Earnings and APIC
Treasury stock reduces:
Stockholders equity (does not affect NI)
Two methods of accounting for treasury stock:
- Cost (Gain/loss calculated upon reissue) and 2. Par (gain/loss calculated upon buying back)
Repurchase stock above cost, journal entry:
Dr. Cash; Cr. T/S and APIC - T/S (The gain goes in APIC)
Repurchase stock below cost, journal entry:
Dr. Cash, APIC - T/S, and RE; CR. T/S
Journal entry for scrip dividends
Dr. RE and Cr. N/P
Property dividends
Restate to FMV and record gain or loss in income
Stock dividends
Either small or large; no dividend income reported
Treatment of small stock dividend vs. large stock dividend
Small: less than 20% (reduce RE by FMV; large: greater than 25% (reduce RE by Par value)
Journal entry for small stock dividend
Dr. RE (FMV) and Cr. C/S and Paid in Capital
Journal entry for large stock dividend
Dr. RE (Par) and Cr. C/S distributable….Dr. C/S distributable and Cr. C/S (par)
Noncompensatory vs. Compensatory stock options
Noncompensatory is only allowed under GAAP; compensatory (value at FV) allowed under GAAP and IFRS
Journal entry for compensation expense
Dr. Compensation expense; Cr. APIC
Expenditures during construction period were spent uniformly during the year, what amount do you capitalize?
Divide the amount by two and then multiply by interest rate (Average accumulated expenditures)
In computing weighed average number of shares outstanding, what midyear event must be treated as if it had occurred at the beginning of the year?
Declaration and distribution of a stock dividend or stock split (Effects prior period EPS as well)
Convertible securities are only recognized for EPS when they are:
Dilutive (Ignored for basic EPS)
Earnings per share =
(Net income - preferred dividends) / weighted common shares outstanding….(dividends do not have to be declared)
What must be subtracted from Net income for EPS?
Preferred dividends (Noncumulative - just needs to be declared) (Cumulative - doesn’t need to be declared or paid)
Dilutive securities include:
Convertible securities, warrants, contracts that may be settled in cash or stock, and contingent shares
Diluted EPS =
(NI-PD+interest net of tax)/weighted avg. common shares outstanding + shares converted to C/S)
