Equity

Question 1

Dilutive EPS Formula

Answer 1

NI - and + Preferred Dividends / weighted avg shares + diluted shares converted

Question 2

Basic EPS Formula

Answer 2

NI - cumulative preferred dividends & non cumulative only if declared / Weighted avg shares outstanding

Question 3

When is a security considered antidilutive?

Answer 3

When the exercise price is greater than the option price

Question 4

Allocation of partnership NI/Loss

Answer 4

Allocation in accordance to partnership agreement. It may include salary &/or interest allowances before dividing NI/loss. If allowances exceed net income, the resulting loss is divided per loss ratio in agreement

Question 5

Small stock dividends (20-25%)

Answer 5

Recorded at fair value at date of declaration

Journal entry:
decrease RE
Increase CS by par
Increase APIC

Question 6

Large stock dividends (greater than 20-25%)

Answer 6

Are recorded at par

Journal:
Increase CS
Decrease RE

Question 7

Admission of a new partner (bonus method)

Answer 7

Add FV of contribution to existing partner capital

X new partner %

Diff of FV & % = bonus

If contribution is more than new partner %, bonus paid to old partners & new partner basis reduced

If contribution is less than new partner %, bonus paid to new partner & old partners basis reduced