Equity

Question 1

148. Does the issuance of stock warrants need to be recorded as a journal entry?

Answer 1

No

but when the warrants are exercised the issuance is recorded just like c/s would be recorded when it is issued.

note: issuing warrants or stock has no effect on earnings

Question 2

148. What is the purpose of a retained earnings appropriation?

Answer 2

to restrict div’s and communicate that restriction to users of the f/s’s.

it is breaking r/e into 2 parts (1) avail for divs (2) unavailable for divs

firm doesn’t need to record appropriation to restrict divs, but it does help to alert stockholders to possibility that divs may be curtailed.