F1 M4 Flashcards
Stockholder's Equity Part 2
stock issued at par
Dr. Cash
Cr. C/S or P/S
stock issued above par
Dr. Cash
Cr. C/S or P/S
Cr. APIC
stock issued below par
Dr. APIC
Cr. C/S or P/S
cash dividends
-cash distributed to common or preferred shareholders
-paid out of retained earnings
-not paid on T/S
property dividends
-distribute noncash assets to shareholders (ex. inventory, investments etc.)
-on date of declaration, property restated to fair value and any gain or loss recognized in income
scrip dividends
-form of notes payable committing to paying a dividend at a later date
-used when there is a cash shortage
-Dr. RE and CR. Notes payable
-some scrip dividends bear interest
liquidating dividends
-when dividends exceed retained earnings
-Dr. APIC and CR. C/S or P/S
-liquidating dividends reduce total paid-in capital
stock dividends
-distribute additional shares to shareholders
small stock dividend
<20 to 25% of shares previously outstanding
-FMV of stock dividend on date of declaration transferred from RE to capital stock and APIC
-no effect on shareholder’s equity as APIC substituted for RE
large stock dividend
> 20 to 25% of shares previously outstanding
-expected to reduce market price of stock
-par value of stock dividend transferred from RE to capital stock for legal requirements
-if no legal requirements, add stock dividend distribution by changing number of shares outstanding and par value per share
JE for small stock dividend
Dr. RE
Cr. C/S
Cr. Paid-in capital
JE for declaring large stock dividend at par
Dr. RE
Cr. C/S distributable
JE for stock dividend distribution at par
Dr. C/S distributable
Cr. Capital stock, par common
stock dividends/splits on T/S
generally not distributed from T/S, but exception when:
1) company is maintaining a ratio of T/S to shares outstanding in order to meet stock option or other contractual obligations
2) state law requires T/S be protected from dilution
does a stock split require a journal entry?
No, only a memo entry to acknowledge split
reverse stock splits
reduces number of shares outstanding and increases par value proportionately
what are stock subscriptions?
a contractual agreement to sell a specified number of shares at agreed price
-on full payment of subscription, a stock certificate evidencing ownership in corporation issued
JE for sale of subscriptions
Dr. Subscription receivable
Cr. C/S subscribed
Cr. APIC
what do you do with subscriptions not paid for at YE?
-treated as contra-equity, which offsets amt of par value and APIC related to subscriptions not paid for at YE
JE for collection of subscriptions
Dr. Cash
Cr. Subscription receivable
JE for issuance of stock previously subscribed
Dr. C/S subscribed
Cr. C/S issued
default/forfeiture of subscription
-reverse portion of original entry not collected and either
1) issue stock in proportion to amt paid
2) refund partial amt
Or
3) retain partial payment (as liquidated damages for breach of contract) by a credit to APIC
what is a stock right?
-provides an existing shareholder an ability to buy more shares
-right carries a price below stock’s market price on date rights are granted
-requires a memo entry only
-stock can be redeemed by company (bought back)
exercise of stock rights JE
Dr. Cash
Cr. C/S
Cr. APIC
stock issued for outside services
-recorded at fair value of stock
-stock issued in a basket sale with other securities allocated a portion of the sales proceeds based on relative fair market values of different securities
