Stockhokders Equity Pt 1 & 2 Flashcards
Appropriated earnings
Reserved/set aside
Once the purpose of appropriated earnings has been achieved, it should be restored to unappropriated earnings
When are treasury stock gains/losses recorded on the income statement?
Gains and Losses on Treasury stock are NEVER recorded on the Income Statement
How are gains and losses on treasury stock recorded? (The JE)
Gains on treasury stock: Crediting (increasing) Additional Paid in Capital- Treasury Stock
Loss on TS: 1st eliminate any balance in Additional paid in capital- treasury stock with a debit, then DR. (decrease) retained earnings
Which of the following will cause an increase in stockholders equity?
A. Loss on the sale of a discontinued segment
B. Sale of Treasury stock at Less than cost
C. The declaration of a cash dividend
D. A loss from a foreign currency translation adjustment.
B. The sale of treasury stock at less than cost will increase stockholders equity as long as cash is received from the sale of treasury stock.
Assume treaty stock initially purchased for $1,000 is sold for $600 and a $200 balance exists additional paid in capital- T/S. What would the JE for this transaction be?
Dr. Cash $600
Dr. Additional Paid in Capital- T/S $200
Dr. Retained Earnings $200
Cr. Treasury Stock $1,000
What is the formula for retained earnings
Net Income/(Loss)
- Dividends declared (cash,stock,ppt)
+/- Prior period Adjustments
+/- Accounting adjustments reported retrospectively
= Retained Earnings
Book value per common share formula
Common shareholders equity/common shares outstanding
common shareholder’s equity=
assets - liabilities - preferred equity - dividends in arrears
Common shares outstanding =
Number of shares issued - number of shares repurchased
Common shareholder’s equity formula
Total Shareholders equity
- Preferred Stock outstanding (higher of call price & par value)
- cumulative preferred dividends in arrears
= common shareholders’ equity
Date of declaration
The date the BoD formally approves of a dividend.
JE made: retained earnings is reduced, and a liability is created
Dr. Retained Earnings
Cr. Bonds Payable
Date of Record
Date the BoD specifies as the date the names of the shareholders to receive dividends are determined
(The Date the BoD announces the day the names of the shareholders to be paid)
Date of Payment
Date that the dividend is actually disbursed by the corporation or its paying agent
How does a shareholder recognize dividend income when it’s issued?
Stock dividends are not recorded as income on the books of the recipient.
The total # of shares increases, and the fmv of the stock decreases???
What is the effect that a 5% stock dividend would have on
1. Assets
2. Total Stockholders Equity
3. Retained Earnings
- Assets = no effect
- Total stockholders Equity= no effect
- Retained earnings = decreases
What is a small stock dividend?
Less than 20-25% of outstanding stock
What is a large stock dividend?
More than 20-25% of outstanding stock
