Stockholders' Equity

Question 1

When is liability created for dividends payable?

Answer 1

Date of Declaration

Question 2

At what cost is property distributed?

Answer 2

Fair Value

Question 3

What are scrip dividends?

Answer 3

Scrip dividends are a special form of notes payable when there is cash shortage?

Scrip dividends sometimes has interest expenses

Dr: Retained Earnings
Cr: Notes payable

Dr: Interest Expense
Cr: Accrued Interest Expense

Question 4

What are liquidating dividends?

Answer 4

Dividends exceed original retained earnings. That means we are giving back investor’s original amount of investment.

Question 5

What to do if you give a small stock dividend (less than 20% - 25%)

Answer 5

Reduce retained earnings by FMV

Question 6

What to do if you give a large stock dividend (more than 20% - 25%)

Answer 6

Reduce retained earnings by Par Value

Question 7

What are the two types of employee stock options?

Answer 7

Compensatory - Compensation

Non-compensatory - No Coompensation

Question 8

What do you do if there is noncompensatory stock option?

Answer 8

NO J/E until stock is purchased

Question 9

Does IFRS have noncompensatory stock option?

Answer 9

IFRS says there is no such thing as noncompensatory stock option.

Question 10

What do you do if there is compensatory stock option?

Answer 10

Stock purchase needs to be valued at FAIR VALUE.