Chapter 15: Stockholders' Equity Flashcards
(46 cards)
What are the sources of Stockholders’ Equity?
- paid in capital
- retained earnings
- accumulated other comprehensive income
This source of stockholders’ equity represents the amounts invested by stockholders.
paid in capital
This source of stockholders’ equity is the amounts earned on behalf of shareholders.
retained earnings
This source of stockholders’ equity is non-owned charges in equity.
accumulated other comprehensive income
What are the share rights for common stockholders of paid-in capital?
- voting rights
- share in profits when dividends are declared
- share in the distribution of assets if the company is liquidated
What are the share rights for preferred stockholders of paid-in capital?
- dividend and liquidation preference over common stockholders
- no voting rights
What are the preferred stock features in paid-in capital?
- may be convertible into common stock
- may be cummulative (dividends) or non cummulative
- dividends
- redeemable preferred stock
In preferred stock features, dividends can be a…
- dollar amount per share or % of rate
- unpaid dividends on cummulative preferred stock must be paid before distribution to common
- dividends in arrears are disclosed in footnotes
In preferred stock features, what type of stocks have debt and equity features and classified as liability.
redeemable perferred stock
Accounting for the issuance of stock in paid-in capital include…
- stock issued for cash
- noncash stock transactions
- share issue costs
In the issuance of stock, the cash investment that is allocated between stated capital (Par) and paid-in capital is what?
stock issued for cash
In the issuance of stock, this should be recorded at the fair value of either the share or the noncash consideration, whichever is more clearly evident.
noncash stock transactions
In the issuance of stock; legal, printing, and accounting fees necessary to sell shares are called what?
share issue costs
What do the share issue costs reduce?
proceeds and paid-in capital
What are the purposes of reacquisition of shares?
- decrease supply of shares in the market to support price of remaining shares
- increase earnings per share
- to provide stock for stock compensation agreements
What kind of account is Treasury Stock?
contra equity account
How is Treasury stock reported?
as a reduction in equity
Type of method that is used for Treasury Stock?
cost method
Journal entry for acquisition (purchase) of Treasury stock?
Dr. Treasury stock
Cr. Cash
Journal entry of Treasury Stock Above Cost?
Dr. Cash
Cr. Paid in Capital - TS
Cr. Treasury Stock (cost)
Journal entry of Treasury Stock Below Cost?
Dr. Cash
Dr. Paid in Capital - TS
Cr. Treasury Stock (cost)
- accumulated undistributed income (loss)
- all dividends are reduced to RE
- restrictions reduce the amont of RE available for dividends
- a debit balance in RE is considered a deficit
Nature of Retained Earnings
All dividends reduce what account?
retained earnings
If retained earnings have a debit balance they are considered to be a what?
deficit
