Midterm 1 Advanced Flashcards
Vaughn company sells a bond at 104, 4680 of its 9% 1000 face value bonds with detachable stock warrants. Each warrant has a market value of 2$ each. Record the journal entry
Debit Cash Credit Paid in capital stock warrants Premium on B/P Bonds Payable
How do you compute weighted average number of shares
Create a Table of: # of Shares * Restatement 1 * Restatement 2 * (Months of Year Active)/12
Sum the result for each Answer
During a stock split, how must you adjust weight average shares
Restate prior WAC calculations in terms of the stock split
What is the formula for calculating normal EPS
(Net Income - Dividends)/(Weighted Average Common Shares)
Only include dividends if preferred stock is CUMULATIVE
When do you include dividends in EPS
Only when they are cumulative
What is dilutive earnings per share
Uses the What-If method to determine earnings per share if all warrants and options were exercised at the beginning of the year
How do you calculate dilutive EPS
(Net Income + Interest Expense Net of Tax + Dividends in Arear Cumulative)/(Weighted Average Shares Outstanding + Extra Common Stock)
What are the three dates when issuing dividends
Date of declaration
Date of record
Date of payment
How do you record the issuing of bond warrants with comparable market value
Debit Cash and D/C bonds payable
Credit PIC Stock Warrants and Bonds Payable and Premium on BP
Calculate value of warrants by doing (Amount * FMV).
The company sold to the public a $ 188,000, 10% bond issue at 103. The company also issued with each $ 100 bond one detachable stock purchase warrant. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $ 7. Record the journal entry
Debit Cash and D/C on Bonds Payable
Credit PIC Stock Warrants and Bonds Payable
Calculate amort by plugging value of warrants (Warrant Amount * FMV)
How do you record the redemption of Bond warrants
Debit Cash and Paid-in Capital Stock Warrants
Credit Common Stock and Paid-in Excess of Par Common Stock
During the current year, the company granted stock options for 10,100 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. How do you record
Debit compensation expense
Credit paid-in capital stock options
What happens when an employee fails to meet a stock option obligation previously recorded?
Debit Paid-in capital stock options
Credit Compensation expense
What is the difference between preferred and common stock
Common stock has voting rights but is not guaranteed dividends
Preferred is guaranteed dividends and has priority bankruptcy but has no voting rights
What journal entry is recorded on the date of declaration for dividends
Debit Retained Earnings / PIC in excess of par / etc.
Credit Dividends Payable
What are the different types of dividends
Property Dividend
Cash Dividend
Stock Dividend
Liquidating Dividends
What is a property dividend
A dividend paid in shares of another company or non cash assets like investments
What is a liquidating dividend
When dividends are paid from Paid-in Capital in Excess of par instead of retained earnings
Debit PIC in excess of par
Credit Dividends payable
What is a stock dividend
A dividend payment to stockholders of additional stock
How do you record payment of dividends in arrear
Debit retained earnings
Credit cash / asset / treasury stock
How do you record a small stock dividend
Debit Dividends payable
Credit Common Stock and PIC in excess of par
How do you record a large stock dividend
Debit Dividend Payable
Credit Common Stock
What dividend does not reduce stockholder equity
Stock Dividend
The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding does what
Decreases retained earnings but does not decrease total stock holder equity
Bonita Industries owns 3750000 shares of stock in Sandhill Co.. On December 31, 2020, Bonita distributed these shares of stock as a dividend to its stockholders. This is an example of a
Property Dividend
A feature common to both stock splits and stock dividends is
There is no effect on total stock holders dividend
When is something anti dilutive
When it raises EPS
A company has 10 stock warrants outstanding to purchase stock at $2 each with $1 par and a market value of $4, how does this effect dilutive eps
The company would buy back 5 shares from the cash gained and then need to issue another 5 shares. This changes weighted average shares outstanding by 5 rather than 10.
How do you record the lowering of a notes payable negotiated with a lowered principle and interest rate.
For Interest payments debit interest expense and notes payable. Credit Cash
Pearl Corporation issued 341 shares of $ 10 par value common stock and 145 shares of $ 50 par value preferred stock for a lump sum of $ 19,188. The common stock has a market price of $ 20 per share, and the preferred stock has a market price of $ 100 per share. Describe the thought process to solve this problem
Calculate the percentage of share worth by getting a percentage of each stocks worth in comparison to the lump sum of the market value. Then apply these percentages to the lump sum paid to determine excess paid of par.
Debit Cash, Credit PIC Common Stock, Common Stock, PIC Preferred, Preferred Stock
