Stock Issuance

Question 1

Treasury Stock

Answer 1

Income IS NOT affected by these transactions. The “gain/loss” is not recognized as earnings rather shown as an increase or decrease (DR: RE/CR: APIC - TS Transactions) to the companys net worth

When acquired, total SE decreases by the amount of cash paid

Question 2

Cost Method - TS

Answer 2

When TS is reissued at a price MORE THAN ITS COST - Credit APIC-TS for the difference.

If price is less than cost, DR APIC

DR: Cash 3,000($50) $150,000
CR: Treasury Stock 3,000($36) $108,000
CR: APIC-TS $42,000

Question 3

TS

Answer 3

When acquiring and RETIRING CS, APIC is decreased because that account from the TS transaction is closed

Retired - CS account is reduced by PAR value of the CS cancelled

Question 4

Par Value Method - TS

Answer 4

When TS is bought and retired at a price HIGHER than the original issue price THEN…

• No more APIC-TS existis (decrease)
• DR: Retained earnings (decrease)
• Decrease in Net CS

Question 5

Stock Dividend

Answer 5

At time declared - no liability recoded. After, will own same proportion.

Changes composition of equity but not total equity

Small - <25% FV DR: RE; CR: CS, PLUG CR: APIC

Large - >25% PV DR: RE, CR CS W/no APIC

Question 6

Stock Split

Answer 6

NOT a dividend; NO JE
Increases # of shares outstanding and DECREASES the par or stated value

Equity accouts (T OE / RE) NOT AFFECTED

***if affected in form of dividend - DR APIC @ par value