New f7 - equity, EPS, and cash flow Flashcards
T-Stock - Treasury stock
- treasury stock is a corporation’s own stock that has been issued to shareholders and subsequently reacquired (but not retired).
- t stock are not entitled to any of the rights of ownership given to common shareholders (voting or dividends)
- four major topics in t stock: cost method (j/e), par value method (j/e), retirement of t stock, donated stock
T-Stock -
Treasury stock - cost method
Treasury stock
+ | -
APIC - t/s
- | +
cost method (APIC-T/S takes the impact)
a. when issue the common stock
Cash xxxx
Common stock xxxx
APIC - C.S xxxx
b. buy back as t-stock
treasury stock xxxx (original cost)
Cash xxxx
c. reissue the t-stock back to market (above cost)
cash xxxx
T-stock xxxx (original cost)
APIC - t/s xxxx
d. reissue the t-stock back to market( below cost)
cash xxxx
APIC - t/s xxxx (taking impact first)
retained e xxxx (plug, if apic-t/s cannot fully cover)
Treasury stock xxxx (original cost)
net income or retained earnings will never be increased through t-stock transaction.
there is no gain or loss on the purchase and/or reissue the t-stock. Any “difference” goes to APIC (either APIC- t/s for cost method, or APIC - c/s for par value method).
If there is a loss, apic - t/s takes the shot, and then retained earning.
T-stock - par value method
par value method
a. original issue (1,000 shares)
cash 10,000 ($10)
common stock 8,000 ($8)
APIC- c/s 2,000 ($2)
b. buy back above issue price (above issue price)
treasury stock($8) 8,000
APIC - c/s (move out) 2,000 ($2)
Retained earnings 2,000 (plug, decrease)
cash 12,000 ($12)
c. buy back below issue price
t - stock ($8) 8,000
APIC - c/s ($2) 2,000
cash 6,000 ($6)
APIC - t/s 4,000 (plug, gain)
d. reissue share (repurchase for 12 and reissue in 20)
cash 20,000
treasury stock($8) 8,000
APIC - c/s (new) 12,000
e. reissue share (repurchase for 12 and reissue for 9)
cash 9,000
t - stock ($8) 8,000
apic - c/s(new) 1,000
诀窍：t-stock和APIC都紧跟par value!!
there is no gain or loss on the purchase and/or reissue the t-stock. Any “difference” goes to APIC (either APIC- t/s for cost method, or APIC - c/s for par value method).
If there is a loss (sold below par value), apic - t/s (FULL) takes the shot, and then retained earning.
cash xxxx
APIC- t/s xxxx
R/E xxxx
T-stock xxxx
Dividends - declared dividends + interests = scrip dividends
4/1/Year 1 - 12/31/Year 1
Retained earnings 100,000
Interests exp 75,000
notes payable** 175,000
1/1year 2 - 3/31/year 2
Interest exp 25,000
notes payable 25,000
Matching principal
Dividends - Liquidating dividends
liquidating dividends occur when dividends exceed retained earnings.
Retained earnings xxxx (first)
APIC - c.s xxxx (second)
common stock xxxx (third)
cash/dividend payable xxxx
Stock Issurance - stock right
the exercise of stock rights requires the following -
Cash [amount received]
c.stock [par]
apic - c.s. [plug]
no market price related!!!! No income related!!!! the portion of proceeds is credited to “APIC-c/s” ALL the time when the right is exercised.
Dividends topics - dates
Dates -
a. date of declaration (is the date the board of directors formally approves a dividend.) - liability created and R/E reduced.
b. date of record ( is the date that shareholders to receive the dividend)
c. date of payment (making the payment)
Retained earnings - Quasi-reorganiation
revises the capital structure
1. purpose - to restate overvalued assets to their lower fair values and to eliminate a retained earnings deficit.
- procedures
bring R/E (deficit) to zero by decreasing the par value
BEFORE
common stock ($30 par) 300,000
apic 150,000
r/e (210,000)
total equity 240,000
Given: Par $30 -> $5
J/E
Common stock ($30 - $5)*10,000 250,000
R/E(bring to zero) 210,000
APIC (Plug) 40,000
AFTER
common stock ($5 par) 50,000
apic 190,000 (150 + 40)
R/E -0-
Total eqity 240,000
主意 total equity 没变的 只是结构改变！
Dividends topic - different kinds of dividends
- cash dividends (paid from retained earnings)
- Property (In-kind) dividends - on the date of declaration, the property - restated to fair value of the date of declaration and any gain/loss goes to income statement.
- scrip dividends - pay later
retained earnings xxx
interest expenses xxx
notes payable xxx (not dividends pay.)
4. liquidating dividends
where RE APIC -> Common stock
RE xxx
APIC xxx
CS xxx
Dividends payable xxx
- stock dividends (new card)
Overall - Stockholders’ equity (CARAT)
Common stock (pref.stock) APIC Retained earnings AOCI (PUFE R) Treasury Stock
Retained earnings - core formula of retained earnings
r/e = net income that has not been paid out as dividends.
NI - Dividends = R/E
net income / loss - dividends \+/- prior period adjustments \+/- accounting changes reported retrospectively \+ adjustment from quasi-reorganization = RE
T-stock - retirement and donation
Retirement of t stock
- cost method
common stock(Par) xxxx
apic - cs (orginial par) xxxx
R/E (PLUG) xxxx
t-stock (repurchase cost) xxxx
- par value method
common stock (par) xxx
t-stock (par) xxx
特点：c-stock and t-stock双消除
Donated t stock
Donated stock is a company’s own stock received as a donation from a stockholder. There is NO CHANGE in total shareholders’ equity!! but the number of share outstanding decreases.
Donated T-stock (@FMV) xxxx
APIC xxxx
When sell donated stock -
Cash (@sales price) xxx
APIC (Plug) xxx
Donated t-stuck (originial FMV) xxx
APIC (Plug) xxx
记住
t-stock
+ | -
Dividends topic - Stock Dividends and Stock Splits
- small stock dividends (
Stock Splits
EPS - Simple Capital Structure - Basic EPS
Major Topics under “Basic EPS”
1. Basic EPS Formula
Basic EPS = income available to common stockholders/WASCO = (Net Income - Pref. Stock Dividends) / WACSO
- Pref. Stock Dividends
Non-cumulative: if Declared -> deducted from NI
Cumulative: Always -> deducted from NI
if there is a loss from continuing operations, the amount of loss will be increased by pref. stock dividends.
- Weighted Average Number of common shares outstanding (WACSO)
Stock dividends and stock splits - affect retrospectively to ALL periods presented.
该stock shares数量的持续时间
- if a stock dividends or stock split occurs after the end of the period but before the financial statements are issued, must revise the prior f/s. AFFECT RETROSPECTIVELY.
EPS - Complex Capital Structure - diluted EPS - overall
report both diluted and basic EPS, pick the lower one
major topics
- options and warrants
- convertible bonds
- convertible perf. stock
- contingent issues
