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1Financial Reporting > Module 15 > Flashcards

Module 15 Flashcards

1
Q

What is stockholders’ equity?

A

The residual of assets minus liability

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2
Q

What is the JE to record the issuance of common stock?

A

Dr. Cash Cr. Common Stock (par value). Cr. Paid-in capital in excess of par

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3
Q

What is preferred stock?

A

Stock with preferential rights: Most Likely able to receive dividends of a set percentage of par value

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4
Q

What is participating mean in regards to stock?

A

Share with common stockholders in dividend distributions after both preferred and common stock holders have received a specified level of divident payment.

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5
Q

What is Cumulative mean in regards to stock?

A

Dividents are not paid in any year (dividents in arrears) must be made up before distribution can be made to common stockholders

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6
Q

What is convertible mean in regards to stock?

A

Preferred stockholders have an option to exchange their stock for common stock at a specified ratio.

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7
Q

What does callable mean in regards to stock?

A

The corporation has the option to repurchase the preferred stock at a specified price

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8
Q

What are stock subscriptions?

A

When a company can purchase stock prior to issuance.

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9
Q

What is the JE to at a stock subscription?

A

Dr. Cash. Dr. Subscription receivable. Cr. Common Stock Subscribed. Cr. Paid-in capital

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10
Q

What is the JE at cash receipt and at issuance.ck

A

Dr. Cash. Cr. Subscription receivable. Dr. Common stock subscribed. Cr. Common Sto

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11
Q

What is Treasury Stock?

A

When a company repurchases on the open market its own stock.

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12
Q

What are the 2 methods to account for treasury stock transactions?

A

Cost Method and Par Value Method

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13
Q

How is Treasury stock treated under the cost method?

A

It is recorded at cost and the difference between cost and resale is recognized at point of resale.

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14
Q

If you resale treasury stock under the cost method above the cost what do you credit?

A

You credit paid-in capital from treasury stock transactions

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15
Q

If you resale treasury stock under the cost method below cost, what do you do?

A

You reduce the balance in 1st) Paid in capital from treasury stock. 2nd) paid in capital from stock retirement. 3rd) than you would debit retained earnings

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16
Q

Can you credit Retained earnings?

A

No.

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17
Q

How is treasury stock treated under the par value method?

A

All capital balances associated with the treasury shares removed upon acquisiton

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18
Q

IF treasury stock cost is over par value what do you do under the par value method?

A

You charge paid-in capital from common stock for the amount in excess of par received

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19
Q

When do you debit retained earnings under the par value method?

A

The excess of the cost of reacquring the stock over the origianl issue cost.

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20
Q

What if the treasuy stock is reacquired at a cost less than original issue cost?

A

You 1) paid-in capital from capital from common stock is debited for the oroginal amount in exces of par. And 2) paid in capital from treasury stock is credited for the difference

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21
Q

When treasury stock is resold how is it treated?

A

It is treated as a typical issuance with the excess of selling price over par credited to “paid-in capital in excess of par”

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22
Q

What is retirement of stock?

A

Formal retirement or constructive retirement of stock with no intent to reissue

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23
Q

What is the JE to record the retirement of stock?

A

Dr. common stock. Dr. Paid-in capital in excess of par dr. Retained earnings cr. Treasury stock

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24
Q

How are gains treated in retirement of stock?

A

Credit paid-in capital from retirement

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25
Q

For a Divident what is the JE at date of declaration?

A

Dr. Retained earnings (dividends). Cr. Dividend payable

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26
Q

For a Dividend, what is the JE at date of record?

A

There is no entry made.

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27
Q

For a Divident, What is the JE at payment date?

A

Dr. Divident Payable. Cr. Cash

28
Q

How do you account for Dividends of both preferred and common stock?

A

First take the % for the PS and multiply it by the par value of PS outstanding. Then take that same % and multiply it by the CS par value. Then take the par of the PS and Par of the CS and add them together use as denominator for distribution of the rest of the dividend.

29
Q

What is a property dividend?

A

Dividends payable in an asset other than cash

30
Q

How are property dividends treated?

A

Recorded at fair value with gain/loss recognized on the difference between assets BV and FV at disposition

31
Q

What is a liquidating dividend?

A

Dividends based on other than earnings and are a return of capital to stockholders

32
Q

How do you treat a liquidating dividend?

A

Paid-in capital is debited. Common stock cannot be debited because it is the legal capital which can only be eliminated upon corporate dissolution

33
Q

What is a Script Dividend?

A

Issuance of promises to pay dividends in the future (may pay interest)

34
Q

What I the JE for a script Dividend declared?le

A

Dr. Retained Earnings Cr. Scrip dividend payable

35
Q

What is the JE for a script Dividend Paid?

A

Dr. Script dividend payable. Dr. Interest expense (maybe) Cr. Cash

36
Q

IS a stock dividend a liability when declaired?

A

No as nothing is beind distributed except more stock certificateds

37
Q

At declaration what is is the JE for a small stock dividend?

A

Dr. Retained earnings (at FMV) Cr. Common stock Distributable (Par). Cr. APIC in excess of par (plug)

38
Q

At declaration what is the JE for a large Stock dividend?

A

Dr. Retained earnings (PAR) Cr. Common Stock Distributable (Par)

39
Q

At Issuance what is the JE for a large or small stock dividend?

A

Dr. Stock dividend distributable. Cr. Common Stock

40
Q

Do stock spits change the number of shares outstanding?

A

“Yes, They also change the par value per share”

41
Q

Do stock spits change the amount of stockholders equity?.

A

No.

42
Q

What is the JE for a stock split?

A

There is no entry made.

43
Q

What is an appropriation of retained earnings?

A

An entry that is used to restrict the amount of retained earnings available for dividends?

44
Q

What is the JE for an appropriation of retained earnings?

A

Dr. Retained earnings. Cr. Reserve for RE

45
Q

What is the service period in stock options?

A

The dates from the grant date to exercise date

46
Q

What is the JE to recognize the grant date of a stock option?

A

Dr. Deferred Comp. expense (FV of option on grant date X # of options) Cr. Stock Options outstanding

47
Q

What type of account is stock options Outstanding?

A

It is a stockholders equity account in the APIC area

48
Q

What type of account is Deferred Comp. Expense?

A

It is a contra account to stock options outstanding

49
Q

During each year in the service what is the JE that needs recorded?

A

Dr. Compenstion expense. (Stock options outstanding / service period) Cr. Deferred compensation expense

50
Q

What is the JE when the stock option is exercised?

A

Dr. Cash (# of shares times price). Dr. Stock options outstanding (above). Cr. Common Stock (at par) Cr. APIC

51
Q

What is a stock appreciation right?

A

IT allows employees to receive stock or cahs equal in amount to the difference between the market value, and some predetermined amount per share for a certain # of shares

52
Q

What is corporate Bankruptcy?

A

Bankruptcy is the final legal act for a company

53
Q

What is the financial statement that is prepared during bankruptcy?

A

Statement of affairs

54
Q

How does the statement of affairs classify assets?

A

1) assets pledged by secured creditors. 2) Assets pledged wih partially secured creditors. 3) Free assets

55
Q

What is a Quasi Reorganization?

A

IT is a reorginization that allows companies to avoid formal bankruptcy proceedings through an informal proceeding. It is applicable when retained earnings were negative

56
Q

What is the prodedure to go through a quasi reorganization?

A

1) revalue assets to current values. 2) eliminate any deficient by charging paid-in capital (first capital then take away common stock par value)

57
Q

What do you have to do for 10 years after a quasi reorganization?

A

You have to date and disclose retained earnings something similar to “since Quasi reorganization of June 30 2010”

58
Q

What is a stock right?

A

They have to give existing shareholders the opportunity to purchase stocks to keep their same % of stock owned.

59
Q

What is the ratio for Dividend Payout?

A

Dividends per share / earnings per share (Basic)

60
Q

What is the ratio for - Book value of common stock?

A

At a point in time - Common stock stockholders equity / common shares outstanding

61
Q

What is the ratio for - rate of return on comon stockholders equity?

A

Net income available to common stockholders / Common stockholders equity

62
Q

What is the debt to equity ratio?

A

Total Debt / stockholders equity

63
Q

Does IFRS issue a comprehensive set of requirements for reporting shareholders equity?

A

No, because laws of a particular jurisdiction or country may influence rules. IFRS provides some rules as to the minimum required disclosures”

64
Q

What is Basic Earnings per Share?

A

Net income available to stockholders (NI - dividends declared on noncumulative preferred stock - dividends accumulated for the current period only on cumulative preferred stock) / Weighted Average # of shares outstanding

65
Q

What are diluted earnings per share?

A

(Net Income - Preferred Dividends) / (Weighted Average # of shares outstanding + # of shares not acquired with proceeds from options.

1Financial Reporting (21 decks)

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