Equity Flashcards
What is cumulative, non-cumulative, and participating/nonparticipating stock
Cumulative is a classification for preferred stock indicating it needs to be paid out every year
Noncumulative means dividends are not paid out for years that were not paid prior
Participating means participating in profits (distributed at same ratio of par value)
How do you account for stock subscriptions
How do you account for the exercising of a stock subscription
What are the two methods for accounting for treasury stock
Cost Method - when you want to reissue shares
Par Method - when shares are repurchased below issue price
What are appropriated retained earnings
When a portion of retained earnings is appropriated as a reserve to meet certain contingent liabilities that may require large payments in the future
What is the date of declaration, record, and payment. What journal entries are associated
Declaration: Debit RE Credit Dividends Payable. Dividend is announced
Record: Shareholders at this date are identified as the ones entitled to receive the dividend
Payment: Debit Dividend Payable Credit Cash
How do you record a property dividend
Adjust the land to FMV by doing the JE:
Debit: Asset or Loss
Credit: Asset or Gain
Record a normal dividend payment where instead of crediting cash, the asset is credited
How do you record a small stock split
Small stock dividend (<20-25%) is recorded at FV of stock at declaration date
Debit retained earnings
Credit common stock and APIC
How do you record a large stock split
Large stock dividend (>25%) is recorded at par value
Debit retained earnings
Credit common stock
(reduces the par value of the common stock)
What is a liquidating dividend
Dividends paid out from a return on capital. Can also be combined with a dividend on earnings in which you would debit Retained Earnings
Debit: APIC
Credit: Cash
What is a scrip dividend and how do you account for it
A promise for payment (dividend) in the future for stockholders with attached interest
- Debit RE Credit Scrip Dividends Payable
- Debit Int. Expense Credit Int. Payable on balance sheet date
- Debit Scrip dividend payable, interest expense, interest payable Credit Cash on settlement date
How do you account for a purchase of treasury stock using cost method
How do you account for selling treasury stock at a gain/loss using the cost method
How do you retire treasury stock using the cost method
How do you account for a purchase of treasury stock using par method
How do you account for selling treasury stock using the par method
How do you retire treasury stock using the par method
How do you record share based payments
Example: compensating a performer in stock
Debit: Expense
Credit: Common Stock, APIC
Use fair value of stock before fair value of services as the measurement
How do you record the initial recognition of stock options (employee compensation)
Debit APIC-Deferred compensation
Credit APIC-Stock options outstanding
How do you expense stock options (employee compensation) over the service period
Straight line the expense based on number of years
Debit Compensation expense
Credit EPIC-Deferred compensation
How do you record the exercising of stock options
Debit: Cash, APIC-Stock options outstanding
Credit: Common stock, APIC
How do you adjust FV of assets and Par Value of Common stock in a Quasi reorganization
Debit Common Stock, APIC (plug)
Credit Assets (down to FV) and Retained earnings to balance RE at zero
Steps in calculating diluted EPS
(Net Income + Interest (net of tax) - dividends)
/ (Average weighted shares outstanding)
When is something considered anti dilutive
When the convertible security/stock increases EPS
