FAR Own Flashcards 3
How do you record a property dividend in retained earnings?
At Fair Market Value at date of declaration
When cash dividends are declared how are they distributed among preferred and common stock?
Cumulative preferred stock dividends are paid on par value of preferred stock and have preference over common stock dividends until all past preferred dividends are paid
How long do you report appropriated Retained Earnings ?
You report appropriated retained earnings until the purpose of the appropriation has been achieved, then it is restored to unappropriated retained earnings
How is common stock reported?
number of shares times par value or stated value
What is the transaction when a corporation receives a donation of it’s own stock?
There is 0 effect. The JE is DR: Donated Treasury Stock At FMV CR: APIC at FMV
Therefore no net change in stockholders equity
AT what date are stock options outstanding reduced?
At the exercise date, even if it is compensatory stock
Where are treasury stock “gains and losses” reported?
They are reported directly to retained earnings, NOT G/L on the income statement. If it is a “gain” it is a credit to APIC, if a “loss” first debit APIC T/S to zero then Debit Retained Earnings
Calculate the Book Value per Share of Common Stock
BV per share =Common stockholders equity/Common shares outstanding
Common shareholders equity includes reduction for treasury stock
Common shares outstanding = total shares ISSUED less treasury shares
When are equity instruments issued for employee services valued?
At the GRANT date
How do you determine the total dividend amount paid to each class of stock (preferred and common)?
First common shareholders receive the percentage of dividends that the preferred stockholders have. The remaining dividend is shared based on the relative capitalization
How is APIC handled when you acquire treasury stock under the par value method?
APIC is reduced by the amount recorded when originally issued
How is T/S accounted for when it is re-sold?
When T/S is resold, it is treated as common stock outstanding because it is now in the hands of shareholders other than the company itself. Therefore include it in calculations of C/S outstanding
Calculate total compensation cost
=market price of the share on the grant date * number of restricted shares rewarded
under the intrinsic value method, how do you determine the intrinsic value of options
=number of share options * (market price of the stock on date of grant - exercise price of the share option)
Market value less exercise price
What is the common stockholders equity formula?
Total Shareholders Equity
-Preferred stock outstanding
-Cumulative preferred dividends in arrears
= Common shareholders equity
