Stockbroker's Equity Flashcards
Who is required to calculate Earnings Per Share
Publicly traded companies are required.
Who has the option of calculating EPS or not
Non-public can choose to calculate EPS, but not required
What is the OBJECTIVE of EPS?
To measure the performance of company over a reporting period.
What are the 2 structures for calculating EPS?
Simple (Basic only) & Complex (Basic & Diluted)
When common stock and preferred stock are issued in a lump sum purchases, how is APIC allocated?
APIC for each is allocated by its respective % of the total FMV of the shares x the proceeds
When is APIC recorded on a stock subscription?
APIC increases on date subscription is recorded - not on the date paid for or issued.
To what extent is retained earnings restricted if legally restricted due to Treasury Stock?
It will be restricted to the extent of the balance in the Treasury Stock account.
When are dividends in arrear recorded for cumulative preferred stock?
They are not accrued until declared
When are dividends in arrears included as a disclosure and not an accrual in the financial statements?
If a year passes and no Cumulative Preferred Stock is declared, then the dividends in arrears are included as a disclosure. Not an accrual in the Financial Statements
What is the gain or loss when a non-monetary asset is distributed to a shareholder?
The gain/loss is the difference between the FMV of the asset distributed at the date of distribution and it’s carry amount on the company’s books.
When is Retained Earning debited for FMV of Stock for a stock dividend?
When Stock Dividend is less than 25% of Common Stock outstanding
When is Retained Earnings debited for Par Value for a stock dividend?
When Stock Dividend is greater than 25% of common stock outstanding
What is the effect of a stock dividend or a stock split on total shareholder equity?
Stock dividends and stock splits both have no effect on Total Shareholder Equity
What is the affect on APIC from a stock split?
Stock splits only affect par value - APIC remains the same
When is compensation expense recorded at the time of grant for a stock option?
Compensation expense is recorded at the time of grant if options are exercisable immediately. They are based on past service. Expense recognized = FV Stock Option x # of Shares
