Stockholder's Equity Flashcards
What is the amount of capital that must be retained by the corporation for the protection of creditors?
Legal capital
What is the basic ownership interest in a corporation?
Common stock
What are common shareholders not guaranteed upon dissolution?
Dividends or assets
How is book value per common share calculated?
Common shareholder’s equity / common shares outstanding
How is common shareholder’s equity calculated?
Total shareholder’s equity - preferred stock outstanding(at greater of call price or par value) - cumulative preferred dividends in arrears
What does fully participating mean?
Preferred shareholders participate in excess dividends without limit
How are mandatorily redeemable preferred stock classified on the balance sheet?
Liability
What are examples that can result in additional paid-in capital?
Sale of treasury stock at a gain, quasi-reorganization, the issuance of liquidating dividends, conversion of bonds, and the declaration of a small stock dividend
What is accumulated earnings (or losses) during the life of the corporation that have not been paid out as dividends?
Retained earnings
What is the formula for retained earnings?
Net income/loss - dividends declared +/- prior period adjustments +/- accounting changes reported retrospectively + adjustment from quasi-reorganization
What is an accounting adjustment that revises the capital structure of a corporation as though it had been legally reorganized?
Quasi-reorganization
What are the purposes of a quasi-reorganization?
To restate overvalued assets to their lower fair values and to eliminate a retained earnings deficit
Under the two methods of accounting for treasury stock, where are the gains and losses adjusted directly to?
Stockholders’ equity
Under the cost method, treasury shares are carried at?
Reacquisition cost
When is a gain or loss on treasury stock determined?
When the treasury stock is reissued
When is additional paid in capital account debited or credited for gains and/or losses?
When treasury stock is reissued at prices that differ from the reacquisition cost
How are treasury shares recorded under the legal method?
Reducing the amounts of par value and additional paid-in capital received at the time of the original sale
On the date of declaration, the property to be distributed should be?
Restated to fair value and any gain or loss should be recognized in income
When may scrip dividends be used?
Cash shortage
JE for Small stock dividend
Dr. Retained earnings, Cr. Common stock and Cr. Paid-in capital
JE to record the declaration of the stock dividend at par for large stock dividends
Dr. Retained earnings and Cr. Common stock disributable
JE to record the distribution of the stock dividend for large stock dividend
Dr. Common stock distributable and Cr. Capital stock
Under IFRS, employee stock purchase plans and stock options are generally considered?
Compensatory plans
