Financial Lecture 7 Flashcards
Define common stock and list the basic properties.
Common stock: Residual ownership interest
List some common properties of preferred stock.
Convertible, callable
Describe the adjustments of a quasi-reorganization.
Assets are restated at fair value
What are the two alternative methods of accounting for treasury stock?
Cost method: Par value method
Summarize the cost method of accounting for treasury stock.
Recorded, carried, and reissued at reacquistion cost
Summarize the par value method of accounting for treasury stock.
Reported as a deduction from capital stock
List the significant dates with respect to cash dividends.
Date of Declaration
List five types of dividends.
Cash
What is the threshold for treating stock dividends as large vs. small stock dividends?
Small stock dividend Large stock dividend
What is the accounting treatment of small stock dividends?
Fair value of additional shares issued at the date of declaration is transferred from retained earnings to capital stock and additional pain-in capital.
What is the accounting treatment of large stock dividends?
Par value of additional shares issued is transferred from retained earnings to capital stock.
Identify the disclosure requirements about capital structure.
Rights and privileges of various securities outstanding
Identify two types of stock options.
Noncompensatory Compensatory
Describe the computation and allocation of compensation expense under compensatory stock option plans.
Compensation cost
Describe the accounting for unexercised, expiring stock options.
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.
What is the basic formula used for calculating EPS?
Income available to common shareholders
Compare basic and diluted EPS.
Basic Diluted
Name the potentially dilutive securities or instruments.
Stock options and warrants and their equivalents
What is the antidilution rule?
Any conversion, exercise, or contingent issuance
List the reporting requirements for EPS.
Face of income statement, with equal prominence for basic and diluted per-share amounts, for both income from continuing operations and net income.
What are the three sections of the statement of cash flows? What cash flows are included in each section?
Operating activities
Define cash equivalents.
Cash equivalents: Cash equivalents are highly liquid investments with maturities of three months or less that are readily convertible into cash with insignificant risk of changes in value.
Name the two methods of presentation of cash flows from operating activities. Which method is preferred?
Direct and indirect method
If using the direct method of presenting cash flows from operating activities, what additional item needs to be included in the statement of cash flows under U.S. GAAP?
A reconciliation of net income to net cash provided by operations needs to be provided as a supplemental schedule. (Not required under IFRS.)
Name the common adjustments made to cash flows from operating activities using the indirect method.
[CLAD]
Current assets and liabilities
Name the most common classes of cash receipts and disbursements included in cash flows from operating activities using the direct method.
Cash received from customers
