Owner's Equity Basics

Question 1

What are the equity accounts:

Answer 1

• Contributed Capital (preferred, common and APIC)
• Earned Capital (retained earnings)
• Accumulated OCI
• Treasury Stock

Question 2

What is another name for APIC?

Answer 2

Capital Surplus

Question 3

What is another name for retained earnings?

Answer 3

Reinvested earnings

Question 4

What are the rights to each type of stock (common or preferred)

Answer 4

Rights to common:

• Vote for Board
• Preemptive right- right to maintain percentage of ownership

Rights to preferred

• Dividends are paid before
• Liquidation rights

Question 5

What are the phases of common stock?

Answer 5

1) Authorized and unissued: authorized is the maximum number of shares a company can issue
2) Issued and outstanding: Number of shares that have been sold and fully paid for by stock holders
3) Issued and in treasury: Not outstanding
4) Retired: Taken off the market and not intent to reissue

Question 6

What is a stock split?

Answer 6

Split:

• Non-cash event
• Applied to outstanding shares
• Shares outstanding increase, value is reduced