Stock

Question 0

Preferred stock

Answer 0

Preferred stock has preferential rights most commonly the right to receive dividends prior to common stockholders.

Question 1

Common stock

Answer 1

Entry to record
Cash (Amount received)dr
Common stock (at par or stated value) cr
Paid in capital excess par (plug) cr APIC

Question 2

Preferred stock is :
Participating
Cumulative
Convertible
Callable

Answer 2

Participating - share with common stockholders in dividend distribution

Cumulative - dividends not paid in any year (dividends in arrears) must be made up for before distributions can be made to common stockholders

Convertible -preferred stockholders have an option of exchanging their stock for common stock at any
specified ratio

Callable - the corporation has to repurchase the preferred stock at a specified price

Question 3

Preferred stock

Answer 3

Shown in equity section of balance sheet

Except for mandatory redeemable preferred stock- must be shown in the liabilities section of balance sheet

Question 4

Stock subscription

Answer 4

Stock (common/preferred) can be subscribed by investors. A receivable is established and "stock subscribed" credited 
At subscription:
Cash dr (any cash received)
Subscription receivable (balance) cr
Common stock subscribed (par) cr
Paid in capital excess of par cr

Cash receipt and issuance 
Cash (balance) dr
Subscription receivable (balance)cr
Common stock subscribed (par) dr
Common stock (par) cr

Question 5

Treasury stock

Answer 5

A firms own stock repurchases on the open market is known as treasury stock. Treasury stock is not an asset instead treated as a reduction of stockholders equity

Contra stockholders equity account

Question 6

Treasury stock cost method

Answer 6

100 shares 50 par sold at 60 required at 70 resold at 75
Reacquire
Treasury stock dr 7000
Cash 7000 cr
Resold at 75
Cash 7500 dr
Treasury stock 7000 cr
Paid in cap treasury stock 500 cr

If the shares had been resold at 65
Cash 6500
Retained earnings 500
Treasury stock 7000

Question 7

Par value method

Answer 7

100 shares 50 par originally sold at 60 Reacquired at 70 and subsequently sold at 75
Reacquire
Treasury stock 5000 dr
Paid in cap common stock 1000 dr
Retained earnings 1000 dr
Cash 7000 cr

Resold at 75
Cash 7500 dr
Treasury stock 5000 cr
Paid in capital common stock 2000 cr

If the shares had celeb resold at 65
Cash 6500 dr
Treasury stock 5000 cr
Paid in capital common stock 1500 cr

Question 8

If you sell treasury stock at loss

Answer 8

Loss goes to retained earnings unless you have APIC use that up first then debit retained earnings

Question 9

Retirement of stock

Answer 9

When formally retired
Common stock dr
Paid in cap in excess of par dr
Retained earnings dr
Treasury stock cr
This assume a loss
If it was a gain credit paid in capital retirement of stock

Question 10

Dividends

Answer 10

At date of declaration
Retained earnings dr
Dividends payable cr
Reduces stockholder equity

No entry at dare of record. Those owing stock at dare of record will be paid the preciously declared dividends. Memo entry

At date of payment
Dividends payable dr
Cash cr

Question 11

Property dividends

Answer 11

Are dividends payable in an asset other than cash but entries are similar

They are recorded at fair value of asset
Bring asset fair value up
Asset dr
Gain on disposal of asset cr

Bring asset fair value down
Loss on disposal of asset dr
Asset cr

Record declaration of property dividends
Retained earnings dr fmv
Property dividends payable fmv

Question 12

Liquidating dividends

Answer 12

Dividends based on other and earnings

Not sufficient retained earnings so return of capital

Must be disclosed
Paid in capital dr
Dividends payable cr

Question 13

Scrip dividends

Answer 13

Are issuance of promises to pay dividends in the future (and may bear interest) instead of cash

Retained earnings dr
Scrip dividends payable cr

Scrip dividends are a liability which is extinguished by payment
Scrip dividends payable dr
Interest expense (maybe) dr
Cash cr

Question 14

Stock dividends

Answer 14

Stock dividends less than 20 to 25%
Small stock dividends

Retained earnings (FV of shares) dr
Stock dividends distributable (par) cr
APIC in excess of par (plug) cr

More than 20 to 25 %
Large stock dividends
Retained earnings (par) dr
Common stock distributable (par) cr

Question 15

Stock split

Change the number of shares outstanding and re par value per share.

Answer 15

Never effects stockholder equity. Only a memo entry

Question 16

Appropriations of retained earnings

An entry to appropriate retained earnings restricts the amount of retained earnings that is available for dividends

Answer 16

JE
Retained earnings or unapproproated dr
Reserve or retained earnings or appropriated re cr

Question 17

Share based payments - stock options

Answer 17

Compensatory - key employees - considered compensation

Depends on when you can exercise

Question 18

Bankruptcy is the final legal act is a company.

Answer 18

In bankruptcy, the accounting and financial reporting must present the information necessary for the liquidation of the business.

Question 19

Statement of affairs

Prepared at current market values

Answer 19

Classify assets in the following priority
Highest to lowest

Assets pledged with fully secured creditors
Assets pledged with partially secured creditors
Free assets

Question 20

Quasi reorganization

Deficit in retained earning

Want to eliminate deficit bring it to zero

Answer 20

Deficit in retained earnings

1. Adj assets to FMV
Write down assets 
JE 
Retained earnings dr
Assets cr

2. Take equity common stock and put into paid in capital account
3. Eliminate deficit in retained earnings with equity from paid in capital account
   Eliminate deficit
   JE
   Paid in capital dr
   Retained earnings cr - hopefully down to zero and no deficit left