Stockholders' Equity Flashcards
The date of _______ is the date the board of directors formally approves a divided.
declaration
JE for declaration of dividends
DR: Retained earnings (reduces RE)
CR: Dividends payable
When all treasury stock transactions are recorded under the “cost method,” and the resale of treasury stock is at a price that _______ its acquisition price, none of the treasury stock transactions affect retained earnings
exceeds
If the rights are exercised and stock is issued, then common stock and additional paid-in capital ______
increase
When treasury stock is sold at a price that exceeds its cost, the excess would be credited to:
APIC
The dividend is a liquidating dividend to the extent that the dividend exceeds:
retained earnings
A property dividend should be recorded in retained earnings at the property’s _____ _____ at date of declaration
market/fair value
Additional paid-in capital is ________ upon the acquisition and retirement of shares at a cost less than initial selling price
decreased
Is there a change in total stockholder’s equity as a result of a donation of stock from a shareholder?
No
The ___ ____ of the warrants is credited to paid in capital/assigned to warrants outstanding
fair value
In a compensatory stock option plan for which the grant and exercise dates are different, the stock options outstanding account should be reduced at the:
exercise date
Net income or retained earnings will _____ be increased through treasury stock transactions
never
Gains and losses on treasury stock transactions are ______ recorded on the income statement. Gains are recorded by _______ Additional Paid-in Capital―Treasury Stock
never; increasing
On which of the following dates is a public entity required to measure the cost of employee services in exchange for an award of equity interests, based on the fair market value of the award?
date of grant
For a large stock dividend, retained earnings is _____ for the par value of the additional shares issued
debited
intrinsic value of the call option
Number of share options × (Market price of the stock on the date of the grant - exercise price of the share option)
Synonym for capital stock
legal stock
Capital stock includes:
common stock and preferred stock
Capital/legal stock cannot be used to:
pay a dividend
APIC and RE can be used to:
pay a dividend
Treasury stock reduces:
stockholder’s equity
Legal capital is the amount of capital that must be retained by the corporation for the protection of:
creditors
Common stockholders’ equity formula:
total shareholders equity - preferred stock outstanding - cumulative preferred dividends in arrears
Book value per common share =
common shareholder’s equity / common shares OUTSTANDING
Fully participating preferred stock means that preferred shareholders participate in excess dividends without
limit
Mandatorily redeemable preferred stock is recorded as a:
liability
Mandatorily redeemable preferred stock must be bought back by the company on the:
maturity date
Accumulated earnings (or losses) during the life of the corporation that have not been paid out as dividends
retained earnings
The purpose of _____ _____ ______ is to disclose to the shareholders that some of the RE are not available to pay dividends because they have been restricted for legal or contractual reasons
appropriating retained earnings
An accounting adjustment that revises the capital structure of a corporation as though it had been legally reorganized & allows a corporation with a significant deficit in RE to eliminate that deficit
quasi-reorganization
The purpose of a quasi-reorganization is to restate _______ assets to their lower ____ _____
overvalued; fair values
Under the cost method, a gain or loss will be determined when treasury stock is:
reissued or retired
Original issue of stock JE:
DR: cash
CR: CS
CR: APIC
Buy back above issue price (cost method) JE
DR: Treasury stock (at cost)
CR: Cash
Reissue above cost (cost method) JE
DR: Cash
CR: TS (at cost)
CR: APIC - TS
Reissue below cost (cost method) JE
DR: Cash
DR: APIC - TS
DR: RE
CR: TS
For the legal (par/stated value) method, a gain or loss is calculated upon:
buy back
Buy back above issue price (par method) JE:
DR: TS (at par)
DR: APIC - CS
DR: RE (plug)
CR: Cash
Buy back below issue price (par method) JE:
DR: TS (at par)
DR: APIC - CS
CR: Cash
CR: APIC - TS (plug)
Reissue shares above par price (par method) JE
DR: Cash
CR: TS
CR: APIC - CS
Retirement of treasury shares under the cost method has the same entries as ________ of treasury shares except cash is not debited, _____ _____ is
repurchase; common stock
The number of shares outstanding ______ as a result of a donation
decreases
Donated stock should be recorded at:
FMV
Stock issued for outside services should be recorded at the ____ _____ of the stock
fair value
On the date of declaration, the property to be distributed should be restated to _____ ______ and any gain or loss should be recognized in:
fair value; income
Scrip dividends are a form of:
notes payable
For a small stock dividend ( < 20%), reduce retained earnings by the ________ of the stock
FMV
For a large stock dividend ( >20%), reduce retained earnings by the _______ of the stock
par value
Stock splits reduces the _____ and increases the number of:
par; shares outstanding
The compensation expense in a compensatory stock option is allocated over the:
vesting period
The fair value of the options (Stock options - APIC) is the:
compensation expense
JE to exercise options under compensatory stock option
DR: Cash
DR: APIC - stock options (reverse comp. exp.)
CR: CS (at par)
CR: APIC (plug)
A “liquidating dividend” is a return of capital (which ______ additional paid-in capital) and not a distribution of earnings (which ________ retained earnings).
decreases (2)
A (pure) “liquidating dividend” implies there is no ______________ left to decrease.
retained earnings
The fair market value of a true stock dividend at declaration date _______ retained earnings and _______ capital stock and paid-in capital.
decreases; increases
When collectibility is reasonably assured, the excess of the subscription price over the stated value of the no par common stock subscribed should be recorded as additional paid-in capital (APIC) when the subscription is: .
recorded/received
Cost of stock rights =
[FMV of rights / (FMV of rights + FMV of stock ex-rights)] x cost of stock
