F1-M4 Stockholders Equity

Question 1

How is the issuance of common stock and preferred stock

Answer 1

Recorded at shares issued times par/stated value

Question 2

What is APIC?

Answer 2

The excess or plug of the par value and amount it is originally issued for.

Question 3

Retained Earnings formula

Answer 3

RE= Unadj RE - cash/property DIV

Question 4

What is a liquidated Dividend?

Answer 4

The excess dividend that has to be paid once retained earnings is exhausted. I.E, if DIV is 400k, RE is 300k. 100k has to be LIQUIDATED to cover the excess. The excess is getting debited from APIC

Question 5

How do stock splits effect dividends declared?

Answer 5

Since stock splits are accounted retrospectively, the dividend is multiplied by the amount of the split. 1.00 DIV on a 2-1 stock split would now make it 2.00 a share.

Question 6

How does the recipient of the DIV report dividend income if both stock dividend and cash dividend were issued?

Answer 6

The recipient will only report the cash dividend on the income statement and the stock dividend will does not produce income for the recipient.

Question 7

How is the G/L of the property dividend recorded on the disposal of assets in stock property

Answer 7

Take the book value minus the fair value times the property dividend declared to determine the G/L.

Question 8

How does a less than 20% dividend effect the accounting equation formula?

Answer 8

Stock DIV less than 20% outstanding will have the stock transfer from RE to capital stock which has no effect on assets, and total equity. However, RE will go down and it will be offset by common stock and APIC. UNLESS IT IS A LIQUIDATING DIV IT WILL REDUCE APIC

Question 9

What change will take place in the stockholders equity account on stock dividends that are less than 20%.

Answer 9

Retained earnings will be decreased by the fair value of the stock times the shares issued. (shares issued can be a percent of outstanding shares)

Question 10

What effect does stock dividends have on total outstanding shares

Answer 10

Stock dividends will increase total outstanding shares

Question 11

What effect does stock compensation distributed to officers have on outstanding shares?

Answer 11

It will increase outstanding shares by the amount of shares distributed

Question 12

common stock (-) treasury stock = what?

Answer 12

Shares outstanding

Question 13

What is the effect on outstanding shares when the company purchases its own shares

Answer 13

Outstanding shares will go down, treasury stock will go up.

Question 14

What is the cost method and legal/par/stated method?

Answer 14

When accounting for the G/L on treasury stock 1) Cost methods will recognize gain upon reissue of treasury. 2) Legal will recognize gain upon repurchase of treasury stock. This will NEVER hit the income statement.

Question 15

What is the natural balance of equity and how does G/L effect entries?

Answer 15

Natural balance is credit, gains will be credited, losses will debited.

Question 16

How do you calc WACSO and how do stock splits and DIV effect them?

Answer 16

Months outstanding minus 12 * shares issued. (How many more months to go out of the year?). Stock splits or dividends effect them as it happened in the beginning of the year.

Question 17

What happens to NI when common stock declines either realized or unrealized? Where it is down on the income statement?

Answer 17

It is shown on the income statement from continuing operations

Question 18

Where are reclass adjustments for OCI reported

Answer 18

In the statement in which they are reported in, either NI or the OCI depends on how the company chooses to report the OCI. IT IS NOT ON THE FOOTNOTES OR THE BAL SHEET.

Question 19

How should Income available to common stockholders be calculated when there is a net loss and dividends in arrears

Answer 19

Regardless of the unpaid DIV within a net loss position, the DIV are added back into the net loss. (you still owe the DIV even if you are in a loss)

Question 20

How does the acquisition of stock effect NI and APIC

Answer 20

Has no effect to NI and an effect to APIC depending in if or under PAR value.

Question 21

As of dec year 2 and 3 had x shares of preferred common stock. How many years of of preferred stock were issued?

Answer 21

This means that there were two years of preferred stock issued.

Question 23

What separates a dividend being an accrued lability or a disclosure

Answer 23

If the DIV has been declared it represents a liability if not declared than it represents a disclosure