F8 Flashcards
Common stock: Residual ownership interest. Basic rights include: Voting rights, Dividend rights, Rights to share in distribution of assets if corporation is liquidated, after satisfaction of creditor and preferred stockholders’ claims
Stockholders’ Equity
Convertible, callable, Redeemable, Dividends can be cumulative and/or participating
Stockholders’ Equity
Assets are restated at fair value (no increase in asset value is permitted, write-downs are charged directly to retained earnings). Liabilities are restated at present value. Retained earnings brought to zero balance by closing to additional paid-in capital or other capital accounts. Remember to continue to date retained earnings for 3-10 years, as this is a departure from cost principle. No negative balance in any capital account.
Stockholders’ Equity
Cost method: Unallocated reduction in stockholders’ equity. Par value method: Deducted from capital stock, Remember, no gains/ losses are recognized no the income statement; income and retained earnings may never increase by the transaction; Additional Paid-in Capital- Treasury Stock account used to record “gains” and absorb “losses.” Treasury stock is not an asset: cash and property dividends are not paid on treasury stock; stock dividends may be paid on treasury stock.
Stockholders’ Equity
Recorded, carried, and reissued at reacquisition cost, Any “gain” is credited to Paid-in Capital -Treasury Stock, Any “loss” is charged against previous “gain”, then retained earnings, Reported as a deduction from total stockholders’ equity
Stockholders’ Equity
Recorded at par value with excess to Paid-in Capital- Treasury Stock or deducted from retained earnings after charged to any Paid-in Capital -Treasury Stock. Reported as a deduction from capital stock
Stockholders’ Equity
Date of Declaration: Becomes a liability and reduces retained earnings, Date of Record: No journal entry, memorandum entry only, Date of Payment: Actually paid.
Stockholders’ Equity
Cash, Liquidating: Return of investment; Property: FMV of assets given up, with gains/loss recognized, Scrip: Promise to pay a dividend in future, Stock: Results in capitalizing part of retained earnings, increasing legal capital. Remember, if 20-25%, record at par value.
Stockholders’ Equity
Small stock dividend: 20-25%; The treatment of stock dividends depends on the percentage of the dividend in proportion to the total shares outstanding prior to the declaration of the dividend.
Stockholders’ Equity
Fair value of additional shares issued at the date of declaration is transferred from retained earnings to capital stock and additional paid-in capital.
Stockholders’ Equity
Par value of additional shares issued is transferred from retained earnings to capital stock.
Stockholders’ Equity
Rights and privileges of various securities outstanding, Number of shares issued upon conversion, exercise, or satisfaction of required conditions during at least the most recent annual fiscal period and any subsequent interim period presented, Liquidation preference of preferred stock, Redemption requirements related to redeemable stock.
Stockholders’ Equity
Noncompensatory: Under U.S. GAAP, substantially all full-time employees may participate; offered equally or as a percentage of salary; reasonable exercise period; and discount is not greater than that offered to stockholders. Compensatory: Compensation cost is determined on the grant date, using an option pricing model. Note: Under IFRS, stock options are generally considered to be compensatory.
Stockholders’ Equity
Compensation cost is based on the fair value of the equity instrument awarded, determined by an option pricing model. This cost is expensed and allocated over the service period.
Stockholders’ Equity
Any balance in “additional paid-in-capital-stock options” is reclassified to “additional paid- in-capital-expired stock options.” Previously recognized compensation expense is not adjusted.
Stockholders’ Equity
Income available to common shareholders divided by Weighted-average # of common shares outstanding
Earnings Per Share
Basic: Simple capital structure (only common stock outstanding): Income available to common shareholders divided by Weighted-average common shares outstanding. Diluted: Complex Capital Structure: Income available to common shareholders assuming conversion of all dilutive securities divided by Weighted-average common shares outstanding after conversion of all dilutive shares.
Earnings Per Share
Stock options and warrants and their equivalents, Convertible securities (bonds and preferred stock), Contracts that may be settled in stock or cash, Contingent issuable shares.
Earnings Per Share
Any conversion, exercise, or contingent issuance that has an antidilutive effect (increases EPS or decreases loss per share) is not included in the calculation unless the shares have actually been converted, exercised, or satisfaction of the contingency met. Each potential common share is considered separately in sequence from most to least dilutive, with in the money options and warrants generally included first.
Earnings Per Share
