Stockholder's Equity

Question 1

Cost method for APIC - Treasury Stock

Answer 1

Calculated by taking the difference between the reissuance price per share ($10) and the cost to the company per share originally ($6)

Question 2

Legal/par method for Treasury stock

Answer 2

Treasury Stock account = the par stock price * the number of shares

Question 3

Liquidating Dividend formula and where does liquidating portion come out of?

Answer 3

Total cash dividend declared - retained earnings

Comes out of APIC

Question 4

How are gains and losses on Treasury Stock recorded?

Answer 4

1. Gains are recorded by increasing Additional Paid-in Capital―Treasury Stock
2. Losses are recorded by first eliminating any balance in Additional Paid-in Capital―Treasury Stock and then decreasing retained earnings

Question 5

Shares issued definition

Answer 5

Issued shares represent the total number of shares a company has distributed to shareholders

Question 6

Outstanding shares definition

Answer 6

Outstanding shares are the portion of issued shares that are still held by external shareholders and are available for trading, excluding those held as treasury stock.

Question 7

What is a nominal account?

Answer 7

A temporary account that is closed at the end of the year

Question 8

Where are preferred stock dividends revenue recorded?

Answer 8

On the income statement