STOCKHOLDERS' EQUITY: PART 1 Flashcards

1
Q

Stockholders’ Equity ( shareholders’s Equity or owners’ equity)

A

the owners’ claim to the net assets(A-L) of a corporation.

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2
Q

Capital Stock (legal capital)

A

the amount of capital that must be retained by the corporation for the protection of creditors

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3
Q

Par Value

A

Generally preferred stock is issued with a par value
common stock may be issued without a par value

any excess of par value is additional paid in capital

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4
Q

Common Stock

A

the basic ownership interest in a corporation

common shareholders may have preemptive rights to a proportionate share of any additional common stock issued if granted in the articles of incorporation

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5
Q

Book Value per Common Share

A

=common shareholders’ equity/ common shares outstanding

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6
Q

Common Stockholders’ Equity Formula

A

Total shareholders equity
(-) Preferred stock outstanding (at greater of call price or par value)
(-) Cumulative preferred dividends in arrears

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7
Q

Retained Earnings (Deficit)

A

Accumulated earnings (or losses) during the life of the corporation that have not been paid out as dividends.

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8
Q

Retained Earnings

A

= Net Income / Loss (-) Dividends (Cash, Property and Stock) declared
+(-) Prior period adjustments
+(-) Accounting changes reported retrospectively

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9
Q

Classification of RE (Appropriations)

A

Appropriated
Unappropriated

Dr RE(unappropriated)
Cr RE appropriated for purposes

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10
Q

AOCI

A

PUFI

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11
Q

Treasury Stock

A

a corporations own stock that has been issued to shareholders and subsequently reacquired but not retired

A portion of retained earnings equal to the cost of treasury stock may be restricted and may not be used as a basis for the declaration or payment of dividends

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12
Q

Methods of Accounting for Treasury Stock

A
  1. cost method
  2. legal ( or par/state value) method

Primary difference between the two methods is the timing of the recognition of “G/L” on treasury stock transactions

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13
Q

Cost Method - Treasury Stock

A
  • Recorded and carried at their reacquisition cost
  • G/L - determined when TS is reissued or retired
  • APIC - cr from gains and db to losses when TS is reissued at prices that differ from the reacquisition cost
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14
Q

Legal Method - Treasury Stock

A
  • recorded by reducing the amounts of par value and APIC received at the time of the original sale.
  • TS db at par value
    APIC - Common Stock db for the pro rata share of the original Issue Price attributable to the reacquired shares
  • APIC is cr for G & db for losses when TS is repurchased at prices that differ from original selling price
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15
Q

Retirement of treasury stock

A
  1. price paid is excess of the par - excess is charged against either (a) PIC (b) RE
  2. Price paid is less than par value - diff cr to PIC
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16
Q

Retirement of TS - JE

A

Cost Method
Dr Common Stock
Dr APIC
Dr RE
Cr TS

Par Value Method
Dr Common Stock
Cr TS

17
Q

Donated Stock

A

Companys own stock rec.d as a donation from a shareholder

recorded at FMV

18
Q

J.E - Donated Stock

A

Dr Donated TS
Cr APIC

sold
Dr Cash
Dr APIC ( SP<original FMV)
Cr APIC ( SP > Original FMV)
Cr Donated TS