Stockholders' Equity Flashcards

1
Q

How is the calculation of treasury stock accounted for under the par value method?

A

Calculate the original journal entry
Db - Cash

Cr - Common stock & APIC

Then basically reverse that entry and account for the treasury stock purchase
Db - Common stock & APIC

Plug - Retained earnings

Cr - Cash

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2
Q

How do preferred dividends in arrears factor into current year basic eps?

A

The current years preferred dividends accrued (if cumulative) is the only year factored into the calculation.

Any prior year dividends whether paid or not would have been calculated in the corresponding previous fiscal years calculation

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3
Q

How would a company acquiring some of its common shares at a price greater than the shares par value and the original issue price, but less than their book value?

A

The stock acquired is not treasury stock, which is a deduction from stockholders equity

Price paid for reacquired shared < than book value = increase in book value per share of remaining shares

summary
- decrease in total stock holders equity and increase in book value eps

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