Equity Flashcards
When calculating stock shares outstanding, what is the treatment for the issuance and purchase of treasury stock?
Issuance of T/S is added to outstanding shares (even for T/S used as officer compensation) W/O consider weights, same as purchase, simply subtract from total outstanding shares
What are the effect differences of stock dividend and stock compensation?
Stock dividend record as: (decrease RE)
Small dividend! ( 25%
JE: Record at par value
RE. xx
C/S. xx
Stock compensation. (Decrease NI)
Compensation expense xx
Compensation payable
What effect of property dividend that have CV > FV, the excess of property CV over the FV report as?
When property dividend is declared, treat the distribution as the same as the disposal of the asset, recognize any loss from distribution of property as a income deduction
How to record a property dividend that the property has higher FV than FV?
RE. At FV 78K
Property dividend payable At CV
Gain. The rest
Result RE to decrease only 60K
What does liquidating dividend decrease?
Liquidating dividend decrease capital account, not RE because liquidating dividend treated as a return of capital, not earnings, so not from RE
What effect doe TS has to outstanding shares?
What about par value?
Included in outstanding shares, so no need to be reduced
After the split, the per share par is cut in half, but total par value is not change
When calculating the small dividend distribution, what share value to use as reduction of RE?
Share FV at date of declaration
Dividend allocation between PS and CS
Situation 1: ps cumulative but non-parcipating
Situation 2: ps is participating
A. Fully participating
B. Partial participating
Situation 1: ps cumulative but non-parcipating
Ps arrear
Ps current + CS current year
Remaining to CS
Situation 2: fully: use prorate rate for ps and CS for remaining after CY distribution
Partial: distribute additional participation % to ps and the rest gave to CS
If the dividend declared is not enough for additional participating for ps, then use prorate rate to distribute additional to ps and the rest to CS
Stock rights entries at issuance to existing shareholders
Record entries for issuance, exercise and when rights elapsed
**At issuance: no entries because no resources has been transferred
When exercised: same as when stock was issuance at issue price, not market price
When Lapsed: no entries needed because it never happened
When stock issued for service payment, entries?
At issuance: records an expense and owners equity = difference between the market price and exercise price times the number of shares under option
For example: issue 300 shares for legal service, 3 rights for one share for th 5 common stock at $20, the market value is $30 at date of issuances, what is the JE for the legal service?
JE At issuance
legal service (30-20) * (300/3) =1000
Stock rights outstanding. Same as legal service cost
JE at the exercise:
Dr. Cash (right times agreed purchase price)
Stock rights outstanding (reverse it)
Cr. C/S Rights * par
APIC. (Market price - par)
RE balance stmt
Beginning RE
+- prior adjustment
+- Catchup adjustment for actg policy change
=restated beginning RE
+- net income / loss
- cash and property dividend declared
- stock dividend
= RE at end of the period
If the stock rights were not exercised, but company still paid redeemed all the rights with monitor consideration, what is the reduction on the equity?
Use rights times the consider price for each rights
When calculate book value of the common stock, what is the key area need to pay attention?
(Total equity - liquidating value of PS )/ shares of C/S
What value does the company carry on B/S after go through quasi-reorganize?
Use market or FV to valuate assets or liabilities to provide a fresh start
When using par value method to account for T/S purchase, what is the JE for the transaction?
When purchase:
Dr. T/S at par
Dr. PIC at difference of issuance price and par price
Dr. RE
Cr. Cash xx
When reissue
Cash at Mv
TS at par
PIC. At issuance price -par
