M3 Preferred & common stock Flashcards
What is Stockholders Equity
The owner’s claim to Net assets (Assets - liabilities)
Legal capital
the amount of capital (preferred and common stock @ par or stated value) that must be retained to pay creditors
Additional Paid-in Capital is
capital in excess of par or stated value
What is Common stock?
The basic ownership interest in a corporation
* C/S shareholders may have preemptive rights to a proportionate share of any additional shares issued if granted in the articles of incorporation
What is Book value per share?
Calculate Book value per common share
The amount common shareholders would receive if all assets were sold at carrying value
=Common Shareholders’ Equity / Common shares outstanding
Calculate Common Shareholders Equity
=Total Shareholder’s equity
- Preferred stock outstanding (greater of Par value or Call value)
-Cumulative preferred dividends in arrears
What feature do Cumulative Preferred Stock have?
All or part of the preferred dividend not paid in any year accumulates to dividends in arrears and must be paid before dividends to C/S shareholders
*Must be disclosed in total and on a per-share basis either parenthetically on the balance sheet or in the footnotes.
What feature does participating preferred stock have?
Fully participating means preferred shareholders receive excess dividends with no limit
Partially participating means they receive excess dividends with a limit
What feature does callable preferred stock have?
It MAY be repurchased at a specific price at the option of the issuer
What is mandatorily redeemable preferred stock (liability)
Callable stock that MUST be repurchased on the maturity date
Retained earnings is
accumulated earnings not paid out as dividends
Net income/loss
- Dividends (cash,property, and stock) declared
+/- prior period adjustments
+/- Accounting changes reported retrospectively
=Retained earnings
What are appropriated retained earnings?
What is the JE for appropriated retained earnings?
Retained earnings not available to pay dividends because they have been restricted for legal/contractual reasons.
DR Retained earnings (unappropriated)
CR Retained earnings appropriated for (purpose)
*Should be reversed when the purpose of the appropriation has occurred
