Owner's Equity Flashcards
Question where you need to calculate net income and you’re given assets, liabilities, and owner’s equity along with dividends paid
Beginning retained earnings is total owner’s equity and ending retained earnings is assets minus liabilities. You use the retained earnings formula and plug everything in to find net income.
Stock issuance journal entry
Dr. Cash
Cr. Common Stock
Cr. APIC
How to account for stock issuance costs
They reduce both the Cash & APIC account
Not expensed
How to account for annual costs of maintaining stockholder records
That is expensed as incurred
Journal Entries for preferred stock called or redeemed
Dr. Dividends - Face times Dividend rate
Cr. Cash - Record dividend in arrears
Dr. Preferred stock
Dr. APIC - Preferred
Dr. Retained earnings - plug
Cr. APIC.Retirement of preferred stocks - plug
Cr. Cash - cash paid for call or redemption
Journal Entries for preferred stock converted
Dr. Dividends - Face times dividend rate
Cr. Cash - record dividend in arrears
Dr. Preferred stock Dr. APIC - Preferred Dr. Retained earnings - plug Cr. Common stock Cr. APIC.Common - plug
Treasury stock key points
- When treasury stock is purchased the owner’s equity decreases by the amount of cash paid
- When treasury stock is sold the owner’s equity increases by the amount of cash paid
Treasury stock Cost method
Journal entry to purchase is always the same
Dr. Treasury stock
Cr. Cash
Selling treasury stock Dr. Cash - amount paid Dr. APIC or R/E if selling price is less Cr. Treasury stock Cr. APIC if selling price is higher
Assume FIFO when selling treasury stock less than previously purchased, use the first purchase price to calculate apic and if there wasn’t any then you debit retained earnings when you sell
Treasury stock par method
- Treasury stock is always at PAR value for purchase and selling
- When you purchase you always debit treasury stock at PAR and credit APIC-Common for the difference between par & original issue price
- When you purchase treasury stock for more than the original issue you end up debiting retained earnings or if you had a previous issue for less than the original issue price then you debit the treasury stock from that journal entry first.
Income is not effected by treasury stock transactions
So no gain or loss is ever recorded
Journal entry to retire treasury stock - cost method
Dr. Common stock - PAR value
Dr. APIC - original issue minus par
Dr. Retained earnings if necessary
Cr. Treasury stock
Canceling treasury stock
Multiply the number of canceled shares and multiply by par value, then subtract that from common stock
How to report Dividends in arrears
They are footnoted only and aren’t a liability until declared
Cash dividends Journal entries
At declaration
Dr. Dividends Declared or Retained Earnings
Cr. Dividends Payable
At Payment
Dr. Dividends payable
Cr. Cash
Property dividends journal entires
At declaration
Dr. Investment in Stock
Cr. Gain - difference between what you paid and what their worth at declaration
Dr. Dividend declared
Cr. Property dividends payable
At payment
Dr. Property dividends payable
Cr. Investment in stock
Script dividend journal entries
At declaration
Dr. Dividends declared or Retained earnings
Cr. Scrip dividends payable
At payment
Dr. Script dividends payable
Dr. Interest expense
Cr. Cash
Liquidating dividends journal entry
At declaration
Dr. Dividends declared - net income value
Dr. APIC - Plug
Cr. Dividends payable
Small stock dividend journal entry
At declaration
Dr. Retained earnings - market value
Cr. Common stock - par
Cr. APIC
Less than 25%
Large stock dividend journal entry
At declaration
Dr. Retained earnings - par
Cr. Common stock
Greater than 20%
How treasury stock affects common stock issued
Does not affect issued stock since its already incorporated into it, only outstanding stock and in problems asking about, any other issuances are added at par value
Dividend allocation fully participating
- Multiply out the par value and find the proportions compared to the total
- If there are enough dividends remaining they are portioned out according to par value percentages from the proportions
Dividend allocation partially participating
- Multiply out the par value and find the proportions compared to the total
- If there is enough multiply the partial % by preferred par value and the rest goes to common
- If there isn’t enough the remainder is based on the par allocation and to find this out you multiply the total par value by the partial %
Book value per share
when noncumlative preferred has value higher than par you divide the total amount by par and multiple that by the value higher than par and that’s what you subtract from the book value per share formula but first you have to add everything as is
How to calculate quazi reorganization
Multiply number of shares of common stock by the difference between original par and value it has to be reduced to. Send find the difference between that and the deficit. Then add the remainder to APIC
