Stockholders' Equity

Question 1

What are five major components of Stockholders’ Equity?

Answer 1

1) Capital Stock
2) APIC
3) Retained Earnings
4) AOCI (F1 - Revaluation Surplus)
5) Treasury Stock

Question 2

How to calculate the Book Value per Common Share?

Answer 2

1) Calculate Common Shareholders’ Equity Formula

Total Stockholders’ Equity
- Preferred stock outstanding
- Cumulative preferred dividends in arrears
= Common shareholders’ equity

2) Calculate Common Shareholders’ Equity

Common shareholders’s equity / Common share outstanding

Question 3

What is cumulative preferred stock?

Answer 3

Dividends that haven’t been paid, are going to accumulate and payable in future (cumulative preferred dividends in arrears)

Question 4

What is participating preferred stock?

Answer 4

Preferred Stockholders get dividends in excess of a specific amount and share equally then pro rata.

Question 5

What is non-participating preferred stock?

Answer 5

Preferred Stockholders are limited to the dividends provided by their preference.

Question 6

How to calculate retained earnings?

Answer 6

Net income/loss
- Dividends (cash, property, and stock) declared
+(-) Prior Period Adjustments (correction of error)
+(-) Accounting changes reported retrospectively
+ Adjustment from quasi-reorganization
= Change in retained earnings

Question 7

What is a quasi-reorganization?

Answer 7

An accounting adjustment, not a legal reorganization.

• Allows a company with a deficit in retained earnings to eliminate that deficit to have a “fresh start.”

Question 8

Does PUFER go in AOCI?

Answer 8

YES.

The pension adjustments, unrealized gains and losses on available-for-sale securities, foreign currency translation adjustments, effective portion of cash flow hedges.

Question 9

Does treasury stock reduce Stockholder’s Equity?

Answer 9

Yes, treasury stock reduces stockholders’ equity with a debit balance?