F1 Module 3 Flashcards
capital stock
-amount of resources a company should have to protect creditors
-par/stated value of preferred or common stock referred to as legal capital
authorized, issued, and outstanding
-authorized: amount of stock per corp. charter doc that legally can sell to shareholders
-issued: shares the corp. decided to sell in exchange for cash
-outstanding: amount of stock sold to shareholders and now are in shareholders hands
common stock
-basic ownership interest
-paid dividends after preferred shareholders
-not have claims on dividends or assets during business dissolution
-have voting rights
-have claims on liquidation of assets after creditors and preferred shareholders
preferred stock
-equity security with preferences
-preferences such as cumulative/non-cumulative dividends
-receive dividends before C/S
-no voting rights
-have preference in liquidation of assets over C/S
book value per common share
-measures amt C/S would receive for each share if all assets sold and creditors had been paid
= C/S equity/C/S outstanding
common stockholder equity formula
total shareholder’s equity
-preferred stock outstanding (greater of call price or par value)
-cumulative preferred dividends in arrears
= C/S equity
fully participating vs partially participating P/S
-participate in excess dividends without limit
-participate in excess dividends with limitations
callable (redeemable) preferred stock
-stock that can be repurchased at specified price
-disclosed on B/S or footnotes
mandatorily redeemable preferred stock
-treated as a liability because it must be bought back by company on maturity date (similar to debt)
-not a liability if buyback is only for liquidation or termination of reporting entity
rule for participating preferred stock
-before any proration of dividends to exist, C/S must receive an equal dividend as preferred shareholders
-so in calculating dividends, preferred shareholders receive (ex. 8%) and so would C/S on their share. Then you prorate the remaining dividends (amount of C/S/total shares) * remaining shares and (amount of P/S/total shares) * remaining shares.
additional-paid in capital
-extra resources contributed to the company over the par/stated value
-can be aggregated and shown as a single balance on B/S
-examples of APIC:
1) sale of treasury stock at a gain
2) liquidating dividends
3) conversion of bonds
4) small stock dividends
retained earnings (deficit)
-amount of earnings (losses) accumulated during life of corporation and no dividends have been paid out
-earnings reduced by distributions to stockholders
-earnings reduced by transfers to APIC for stock dividends
-RE does not include T/S or AOCI if RE has a negative balance
retained earnings formula
Net income/loss
- Dividends (cash, property, stock) declared
+/- prior period adjustments
+/- accounting changes reported retrospectively
= RE
appropriated retained earnings
-portion of RE used for a particular purpose
-important to make a disclosure of it
-do restrict amount of dividends to be declared
-used for contractual or legal purposes
ex. bond indenture, plant expansion
JE:
Dr. Unappropriated RE
CR. Appropriated RE
AOCI
-accumulates all OCI items
-not included in determining NI and not in retained earnings
-shown on shareholder’s equity section separate from capital stock, APIC and RE
