Equity Flashcards
How to treat property dividend i.e. non monetary dividend to investors
record the distribution at fair mkt value of the asset distributed. The diff from the book is recorded at a gain or loss
Dr. RE Cr. Dividend payable (mkt value)
Dr or Cr. to adjust asset and Dr. or Cr. to record loss/gain on disposal
what is diluted EPS and how is it calculated
The reason for stating diluted earnings per share is so that investors can determine how the earnings per share attributable to them could be reduced if a variety of convertible instruments were to be converted to stock. Thus, this measurement presents the worst case for earnings per share. Earnings per share information only needs to be reported by publicly-held businesses.
((Profit or loss attributable to common equity holders of parent company
+ After-tax interest on convertible debt + Convertible preferred dividends)) ÷
(Weighted average number of common shares outstanding during the period
+ All dilutive potential common stock)
what are stock subscriptions?
Stock subscriptions are a mechanism for allowing employees and investors to consistently purchase shares of company stock over a long period of time, usually at a price that does not include a broker commission. Because there is no commission, the price at which shares are purchased represents a good deal for buyers. Stock subscriptions can reduce shareholder and employee turnover, since they have an interest in remaining with the company to continue to take advantage of the subscription deal. The arrangement also represents a modest increase in the amount of funding available to the company.
To account for a stock subscription, create an account receivable for the full amount expected to be paid, with an offsetting credit to a stock subscription account. When the company later receives cash from the subscribing parties and issues stock to them, the receivable is eliminated.
What is a dilutive security?
They increase the weighted no. Of shared outstanding. They are securities that are not common stock in form, but can allow the owner to obtain common stock upon exercise of an option or conversion of privilege.
What are stock options?
A stock option is a financial instrument that is recorded at its fair value and is remeasured to fair value at the end of each reporting period with the gains and losses reported in income of the period.
How to record small stock dividend
A stock dividend is considered to be small if the new shares being issued are less than 20-25% of the total no. Of shares outstanding prior to the stock dividend.
On date of declaration j/e to transfer the market value of the shares being transferred.
Dr r/e
Cr c/s - dividend distributable at par
Cr PIC in excess of par
How to record large stock dividend
Stock dividend is considered to be large if the new shares being issued are more thank 20-25% of the total value of the shares outstanding prior to the stock dividend.
On the date of declaration a j/e is made to transfer the par value of the shares being issued from R/e to PIC section of stockholders equity.
Dr. R/E
Cr c/s dividend distributable
What are antidilutive securities
Antidilutive describes the effect of securities retirement, conversion or corporate action on EPS, where EPS is increased for shareholders
What is the treasury stock method and when is it used.
It is used to calculate the net increase in shares outstanding if in the money options and warrants were to be exercised.
- It assumes that the options and warrants are exercised
- The cost is assumed to be used to purchase common stock at the average market price
- The diff between the no. Of shares assumed to be issued and the no. Of shares assumed to have been issued purchased is added to the denominator in calculating DEPS
What is a notional amount?
Notional amounts are the referenced associated asset or liability that is commonly a number of units, such as barrels of oil.
Under IFRS what are the types of hedges
- Cash flow hedge
- Fair value hedge
- Hedge of net investment
Gaap also includes foreign currency hedge
What is the if converted method
For convertible securities assumes that the securities were converted at the later of the beginning of the period or the date of issue.
What is a script dividend?
It is a dividend issued by the corporation in the form of a note payable
What is an underlying
An underlying is commonly a specified price or rate such as a stock price, interest rate, currency rate, commodity price, or a related index. However, any physical or financial variable with observable changes or objectively verifiable changes qualifies as an underlying.
