Stockholders Equity Flashcards
Common stockholders equity formula
Total shareholders equity
- preferred stock outstanding (at greater of call price or par value)
- cumulative preferred dividends in arrears
= common shareholders equity
Book value per common share
Common stockholders equity/
Common shares outstanding
Retained earnings formula
Net income/loss
- dividends (cash,property,and stock) declared
+/- prior period adjustments
+/- accounting changes reported retrospectively
=retained earnings
APIC - treasury stock
There is no gain or loss on the purchase and or sale of treasury stock. Any differences goes to paid in capital
or if there is not enough paid in capital to absorb the loss the loss would be debited (subtracted) from retained earnings
The acquisition of treasure stock at a price less than book value will
Decrease stockholders equity in total. (All treasury stock transactions decrease total equity)
And increases book value per share
retained earnings appropriation can be used to
Restrict earnings available for dividends
Does not affect income statement
Cumulative preferred stock dividends are paid on
PAR VALUE not sales price
Preference over common stock dividends until all past preferred stock dividends are paid
When the cost method is used to account for treasury stock, common stock is reported on the balance sheet as
The total shares issued at par value
Shares of a company’s own stock held by a corporation should be recorded as
Treasury stock and shown as a reduction in the stockholders equity section of the BS
Dividend income
of shares x dividend per share
Stock issued above par value
Cash will be debited for the proceeds, common or preferred capital stock will be credited for par or stated value, and APIC will be credited for the excess over par or stated value
Stock rights
Provides an existing shareholder with the opportunity to buy additional shares. Usually carries a price below the stock market price on the date the rights are granted.
Memorandum only.
Liquidating dividends
When dividends to shareholders exceed retained earnings.
Reduces total APIC
Stock split
Occurs when a corp. issues additional shares of its own stock Two current shareholders and reduces the par or stated value per share proportionately. No change in total book value of shares outstanding. Memo entry only. Does not usually affect retained earnings or total shareholders equity
Doubles stock
A stock dividend decreases
Retained earnings
But has no effect on assets or total stockholders equity
