Stockholders Equity

Question 1

APIC for each is allocated by its respective % of the total FMV of the shares x the proceeds.

Answer 1

Stockholder’s Equity

Question 2

APIC increases on date subscription is recorded - not on the date paid for or issued

Answer 2

Stockholder’s Equity

Question 3

It will be restricted to the extent of the balance in the Treasury Stock account.

Answer 3

Stockholder’s Equity

Question 4

They are not accrued until declared.

Answer 4

Stockholder’s Equity

Question 5

If a year passes and no Cumulative Preferred Stock is declared- then the dividends in arrears are included as a disclosure - not an accrual in the Financial Statements.

Answer 5

Stockholder’s Equity

Question 6

The gain or loss is the difference between the FMV of the asset distributed at the date of distribution and its carry amount on the company’s books

Answer 6

Stockholder’s Equity

Question 7

The effect on Retained Earnings is the Carrying Amount of the asset

RE will be debited when the dividend is declared for the FMV of the asset- which is more (or less) than the carrying amount

Gain/Loss recorded when the asset is distributed will offset the original effect of the debt to RE and will be a wash

The net effect of the entry is that RE will decrease by the CV of the asset

Answer 7

Stockholder’s Equity

Question 8

When Stock Dividend is less than 25% of Common Stock outstanding

Answer 8

Stockholder’s Equity

Question 9

When Stock Dividend is greater than 25% of common stock outstanding

Answer 9

Stockholder’s Equity

Question 10

Stock dividends and stock splits both have no effect on Total Shareholder Equity

Answer 10

Stockholder’s Equity

Question 11

Stock splits only affect par value - APIC remains the same.

Answer 11

Stockholder’s Equity

Question 12

Compensation expense is recorded at the time of grant if options are exercisable immediately

They are based on past service.

Expense recognized : FV Stock Option x # of Shares

Answer 12

Stockholder’s Equity

Question 13

The risk-free interest rate

Answer 13

Stockholder’s Equity

Question 14

The settlement date.

Answer 14

Stockholder’s Equity

Question 15

Compensation costs for share-based payments classified as liabilities are measured by the change in the fair value of the instrument for each reporting period

Answer 15

Stockholder’s Equity

Question 16

Net increase to SHE : Gain on settlement of debt + Credit to SHE from stock issuance

Answer 16

Stockholder’s Equity

Question 17

To eliminate a deficit balance in RE by restating its assets to Fair Value

It does not directly protect a company from its creditors

Answer 17

Stockholder’s Equity

Question 18

(Net Income - P/S Dividends) / Average Common Stockholders Equity

Note: Average CSE : Common Stock + RE

Answer 18

Stockholder’s Equity

Question 19

Total Common Stock
- Total Preferred Stock
- P/S Dividends in Arrears
- P/S Liquidation Premium
:Total Book Value

Book Value per Share : Total Book Value / Shares outstanding

Answer 19

Stockholder’s Equity

Question 20

Dividends per share / earnings per share

Answer 20

Stockholder’s Equity

Question 21

(Net Income - Preferred Dividends) / Average C/S Outstanding

Note - If cumulative- subtract the P/S dividend regardless of whether or not they’re declared.

Answer 21

Stockholder’s Equity

Question 22

For EPS purposes- treat C/S stock splits or stock dividends as if they occurred at the beginning of the year- regardless of when actually issued during the year

Answer 22

Stockholder’s Equity

Question 23

EPS is only required to be shown for Income from Continuing Operations and Net Income.

All others (discontinued operations- extraordinary items) can be shown on the Financial Statements or in the notes

Answer 23

Stockholder’s Equity

Question 24

Only if they are dilutive.

Their exercise price is LESS than the market value

If not- you ignore them in the calculation

Answer 24

Stockholder’s Equity

Question 25

[Net Income + Bond Interest (Net of Tax)] / (Average Common Stock Shares + Convertible Equivalents)

Bond interest is added back because if converted- there would be no bond interest expense

Contingent Issue Agreements are included in Diluted EPS if contingency is met

Answer 25

Stockholder’s Equity