Owner's Equity Flashcards
Assume 2,000 shares of $3 par common stock are issued for $12 per share
Cash 24,000
- —-Common Stock 6,000
- —-APIC 18,000
Assume 2,000 shares of $3 par common stock are issued for $12 per share and incurs $1,000 of stocks issue costs
Cash 23,000(24-1)
- —-Common Stock 6,000
- —-APIC 17,000
Cash and APIC are reduced
Firm issues 2,000 shares of $2 par common stock in exchange for land appraised at $32,000. Market price for each share is $15
Land 30,000(2,000*15)
- —-Common Stock 4,000
- —-APIC 26,000
An issue of preferred stock at $100 par, with preferred dividend of 7%, and 1,000 shares of outstanding is called for 101. Dividends of this year have not been paid, dividends of prior years have
Dividends 7,000 [(1,000 * 100) * 7%]
—–Cash 7,000
Preferred Stock 100,000
Retained Earnings 1,000
———-Cash 101,000
An issue of preferred stock at $100 par, with preferred dividend of 7%, and 1,000 shares outstanding is converted to $1 par common stock at a rate of 4 shares of common per share of preferred. Preferred stock was issued for 102
Dividends have not been paid this year, previous years have been paid
Dividends 7,000 [(1,000 * 100) * 7%]
—–Cash 7,000
Preferred Par 100,000
Preferred Apic 2,000
———-Common Stock 4,000 (1,000 * 4 * 1)
———-Common APIC 98,000
Cash Dividend Journal entry at declaration
Dividends Declared or R/E
—–Dividends Payable
Cash Dividend Journal entry at payment
Dividend Payable
———-Cash
- Firm declares property dividend in the form of shares of stock held as investment
- Shares were purchased for $400,000
- At date of declaration they were worth $430,000
- Journal entry at declaration
Investment in Stock 30,000
———-Gain on Investment 30,000
Dividends Declared or R/E 430,000
—–Property Dividends Payable 430,000
- Firm declares property dividend in the form of shares of stock held as investment
- Shares were purchased for $400,000
- At date of declaration they were worth $430,000
- Journal entry at payment
Property Dividend Payable 430,000
———-Investment in Stock 430,000
What is a script dividend
When a company declares a dividend but doesn’t have the cash to pay it
- Dick declares a dividend of $.40 per share and has 10,000 outstanding.
- Dick doesn’t have the cash to pay the dividends
- Promises to pay dividends in 6 months with 10% interest
- Journal Entry at declaration
Dividends Declared/Retained Earnings 4,000
———Script Dividends Payable 4,000
- Dick declares a dividend of $.40 per share and has 10,000 outstanding.
- Dick doesn’t have the cash to pay the dividends
- Promises to pay dividends in 6 months with 10% interest
- Journal Entry at payment
Script Dividends Payable 4,000
Interest Expense 200 (4,00010%half year)
———–Cash 4,200
- Mining corp has a net income of $50,000 which reflects $10,000 of depletion
- Dividend up to $60,000 can be paid because depletion can be ignored
- Assume $56,000 dividends are declared
- Liquidating dividends
Dividends Declared 50,000
APIC 6,000
—–Dividends Payable 56,000
Large Dividend >25% Journal Entry
Retained Earnings
———-Common Stock
Use PAR Value
Dividend Allocation - Fully Participating
- Find Total Par Value Proportions
- If there is enough dividends remaining after preferred & common are initially paid then use par proportions to disperse the remaining dividends
- Just go in priority order
Dividend Allocation - Partially Participating
- Find total par value proportions
- If there is enough give preferred its partial % of par value and the rest to common
- If there isn’t enough then allocate based on par proportions
Stock Right Notes(warrants)
Treated like Issuance of Stock so doesn’t effect Retained earnings
Equity and unrealized losses & gains of AFS
Reduces or increases equity because they are included in other comprehensive income which is included in equity
Book Value Per Share Formulas
[Owner’s Equity minus Preferred Stock Claims] divided by Ending # of common shares outstanding
or
Common Shareholder’s Equity divided by Ending # of common shares outstanding
Treasury Stock - Purchasing Treasury Stock at Cost Journal Entry
Treasury Stock
———-Cash
Treasury Stock - Issuing Treasury Stock at Cost Journal Entry
Cash(Issue Price)
- ——–Treasury Stock(previous purchase price)
- ——–APIC - Treasury
If Reissued for less then APIC is debited
Treasury Stock - Purchasing Treasury Stock at Par Journal Entry
Treasury Stock(original par)
APIC - Common(original issue diff)
———-APIC - Treasury(Purchase difference with issue)
———-Cash(cost)
Treasury Stock - Issuing Treasury Stock at Par Journal Entry
Cash(Issue price)
- —-Treasury Stock(original par)
- —-APIC - Common(issue minus par)
When Treasury Stock in Canceled
Common Stock Account is reduced by the Par value of common stock canceled
