Stockholder's Equity

Question 1

What is the amount of capital that must be retained by the corporation for the protection of creditors?

Answer 1

Legal capital

Question 2

What is the basic ownership interest in a corporation?

Answer 2

Common stock

Question 3

What are common shareholders not guaranteed upon dissolution?

Answer 3

Dividends or assets

Question 4

How is book value per common share calculated?

Answer 4

Common shareholder’s equity / common shares outstanding

Question 5

How is common shareholder’s equity calculated?

Answer 5

Total shareholder’s equity - preferred stock outstanding(at greater of call price or par value) - cumulative preferred dividends in arrears

Question 6

What does fully participating mean?

Answer 6

Preferred shareholders participate in excess dividends without limit

Question 7

How are mandatorily redeemable preferred stock classified on the balance sheet?

Answer 7

Liability

Question 8

What are examples that can result in additional paid-in capital?

Answer 8

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

Question 9

What is accumulated earnings (or losses) during the life of the corporation that have not been paid out as dividends?

Answer 9

Retained earnings

Question 10

What is the formula for retained earnings?

Answer 10

Net income/loss - dividends declared +/- prior period adjustments +/- accounting changes reported retrospectively + adjustment from quasi-reorganization

Question 11

What is an accounting adjustment that revises the capital structure of a corporation as though it had been legally reorganized?

Answer 11

Quasi-reorganization

Question 12

What are the purposes of a quasi-reorganization?

Answer 12

To restate overvalued assets to their lower fair values and to eliminate a retained earnings deficit

Question 13

Under the two methods of accounting for treasury stock, where are the gains and losses adjusted directly to?

Answer 13

Stockholders’ equity

Question 14

Under the cost method, treasury shares are carried at?

Answer 14

Reacquisition cost

Question 15

When is a gain or loss on treasury stock determined?

Answer 15

When the treasury stock is reissued

Question 16

When is additional paid in capital account debited or credited for gains and/or losses?

Answer 16

When treasury stock is reissued at prices that differ from the reacquisition cost

Question 17

How are treasury shares recorded under the legal method?

Answer 17

Reducing the amounts of par value and additional paid-in capital received at the time of the original sale

Question 18

On the date of declaration, the property to be distributed should be?

Answer 18

Restated to fair value and any gain or loss should be recognized in income

Question 19

When may scrip dividends be used?

Answer 19

Cash shortage

Question 20

JE for Small stock dividend

Answer 20

Dr. Retained earnings, Cr. Common stock and Cr. Paid-in capital

Question 21

JE to record the declaration of the stock dividend at par for large stock dividends

Answer 21

Dr. Retained earnings and Cr. Common stock disributable

Question 22

JE to record the distribution of the stock dividend for large stock dividend

Answer 22

Dr. Common stock distributable and Cr. Capital stock

Question 23

Under IFRS, employee stock purchase plans and stock options are generally considered?

Answer 23

Compensatory plans