Stocks Flashcards
Issue of Stocks for Cash
DR Cash/Asset
CR Common/Preferred Stock
Preferred Share Conversion to Common Shares
DR Preferred Stock (with the BOOK VALUE)
CR Common Stock
Conversion value = value in preferred stock * % of shares converting (update # of stocks after this, should have less p/s and more c/s)
Cash Dividend: Date of Declaration
DR Retained earnings
CR Dividends payable
Cash Dividend: Date of Record
No entry
Cash Dividend: Date of Payment (Distribution)
DR Dividends Payable
CR Cash
Stock Dividend: Date of Declaration
DR Retained earnings
CR Dividends Distributable (NOT A LIABILITY)
Stock Dividend: Date of Record
No entry
Stock Dividend: Date of Payment
DR Dividends Distributable
CR Common Stock
(update # of stocks after this)
Calculating stock dividend value
1) Multiply # of common shares oustanding by % of dividends declared
2) Multiply new # of shares issued by MARKET price of stock at time dividend was declared
= new value for entry on date of declaration
Stock splits
No entry, just update the # of shares
Stock repurchase if purchase price is less than book value
DR Common stock
CR Contributed capital, common stock (the difference)
CR Cash
Stock repurchase if purchase price is greater than book value
DR Common stock
DR Retained earnings and/or Contributed capital, common shares (the difference) –> can only DR contributed capital until a 0 balance, and remainder must be DR to retained earnings (if there’s no contributed capital account open, DR entire amount to RE)
CR Cash
Book Value of Common Shares Calculation (for a common stock repurchase)
Average share price * # of shares repurchased
Cash Paid for a repurchase calculation
of shares repurchased * share price
