Equity Flashcards
What are the important dates and JEs for recording cash dividends
What is a liquidating dividend
Dividend is greater than RE balance
What is appropriated retained earnings?
Calculating goodwill when admitting a new partner
What is a scrip dividend, and what are the JE’s
A dividend when a company is short cash, an inplace of dividend payable, interest bearing note payable
What is a stock dividend and what types are there
Issuance of stock to existing stockholders. There are two types, small stock and large stock dividends. The company declares the dividend at a certain percentage. Anything over 20-25% is generally considered a large stock dividend.
What is the large stock dividends % and what the JE.
Whats the difference between a stock split and a stock dividend?
What is a quasi-reorganization and what are the steps?
A company with a large RE deficit balance may face bankruptcy and forced to reorganize.
Partnerships with salary allowances
Partnership net income - special allowances to partners = remaining income/loss to be allocated to partners*
(*using partner percentages)
Partnership with salary allowance example.
JEs for Treasury Stock Par value Method, repurchase (less & greater than OC) and reissue
If repurchased less than OC, Credit APIC TS.
If repurchased greater than OC, debit APIC TS. Use PAR calc only for debit to Treasury shares and the removal of APIC CS.
APIC T/S is always NP - OC.
Cash is always NP.
Reissuance is like typical CS issuance but with TS
Steps to Admission of a new partner using bonus method
JE for Recording property dividends and on what date
Note: If the property is stock, G/L = (FV - CV at declaration) X # of shares
Recording property dividend JE
What is a stock warrant
To increase marketability of bonds, issuer provides bondholders right to buy shares of stock of the company at a fixed price for a specific period. If the stock warrant can be sold separately, its a detachable stock warrant. The proceeds from the warrants are recorded to APIC and increases SH equity.
What are the journal entries for recording, collecting, and reversing stock subscriptions?
How are Property Dividends recorded/JE
Property is recorded at FV, any G/L is recorded when asset is sold.
1) Adjust asset to FV at time of distribution, record G/L for any difference
2) JE Dividends payable and retained earnings for the FV amount of property.
Allocation of partnership net income/loss to partners
How do you calculate the book value per common share when preferred stock is involved?
Repurchase/Reissue Treasury Stock Cost method
Reissuing Treasury Stock using cost method at a price Less than orignal cost results in a __________
Reissuing at a loss (below original cost) results in an equity reduction, which is not ideal because it debits APIC or Retained Earnings
Reissuing Treasury Stock using cost method greater than OC results in _____. Whats the JE?
Results in a credit/gain to Additional Paid-in Capital (APIC) for the difference between the reissue price and the original cost.
The company gains additional capital from reissuing treasury stock at a higher price.
No impact on Retained Earnings
Bonus method when forming a partnership with Initial Capital Divided Equally
What are the rules for Small stock dividends and the Journal entry
How should the sales proceeds from issuing common stock and preferred stock for a lump sum be allocated?
Small vs Large stock dividends. What are the percentage threshholds for each? What are they recorded at? And what are the JEs?
What are the 3 methods for admitting a new partnership, when are they used, and what is their treatment
What are the steps for admitting a new partner under the Exact Method
Allocation of partnership net income/loss to partners equation.
Calculate Dividends for Fully Participating Cumulative Preferred Stock
What are the steps to Conversion of Preferred Stock to Common Stock
What is the order of dividend payments
Preferred shareholders must be paid their arrears first. CS holders get theirs if there’s any left
What are the two treatment rules for dividends in arrears
How to Allocate Proceeds When Stock is Issued with Other Securities
Trigger words for income bracketing and partner allocation
1) Up to $X:
2) Over $X:
3) Remaining income over $X:
What are the key take aways for the Equity method accounting treatment for CS holders vs PS holders
COMMON STOCK:
- 20-50% ownership: Equity method is used. CASH Dividends reduce the investment account. Investor recognizes a share of investee’s net income.
- Less than 20% ownership: Dividends are recognized as income.
PREFFERD STOCK:
- Regardless of ownership, preferred stock does not provide significant influence.
- Dividends are always reported as income when declared, regardless of ownership percentage.
How do you calculate and record the liquidating portion of a dividend?
Do stock dividends and cash dividends affect current liabilities
The partnership agreement provides:
Axel receives 10% of net income up to $100,000 and 20% of income over $100,000.
Berg and Cobb each receive 5% of income over $150,000.
Remaining income is divided equally among all three partners.
Net income for Year 2 is $250,000.
How is Axel’s allocation calculated for the following partnership agreement?
