Equity Flashcards
(27 cards)
What is issued stock?
The amount of authorized stock that was actually issued
What is stock outstanding?
Stock outstanding is issued stock that was purchased by shareholders, excluding treasury stock.
What is an MRFI?
Mandatorily redeemable financial instruments are common stock with an unconditional obligation. They are liabilities unless otherwise stated.
How do you determine the number of shares for treasury and common stock?
Divide the listed amount by the par value.
What is the issuance of stock journal entry? (Entry for the Company issuing the stock)
Debit cash for total
Credit stock account (cs or ps)
Credit APIC
What is the journal entry for direct cost of issuing stock?
Debit APIC
Credit Cash
For amount of cost, don’t confuse with debt issue cost which is amortized
What is a stock warrant?
The right to purchase shares at a specified price and specified period.
What is a preemptive right?
The right to purchase a pro rata amount of a new issuance of the same class of stock.
What happens when rights are issued for no consideration?
The issuer makes only a memorandum entry because there is no money involved
Treasury Stock Acquisition
What is the journal entry for the cost method?
Debit Treasury Stock
Credit Cash
It reduces total Equity
Treasury Stock Acquisition
What is the journal entry for par value method?
Debit TS
Debit APIC
Debit retained earnings
Credit Cash
What is the journal entry for the cost method, treasury stock acquisition?
Debit: Treasury Stock
Credit: Cash
What’s the journal entry for cash dividends?
Declaration: Dr. retained earnings & Cr. dividend payable.
Payment: Dr. dividend payable
& Credit cash
What’s a stock dividend?
A portion of retained earnings is capitalized as part of Paid in capital.
True or false
In a stock dividend the par value of shares does not change.
True
True or false
In a stock split the par value of shares does not change.
False. The par value of shares is reduced.
An issuance of shares that is less than 20-25% of previously outstanding common shares is what?
A stock dividend
An issuance of shares that is more than 20-25% of previously outstanding common shares is what?
A stock split
What is a stock split in the form of a dividend?
When an entity is legally required to capitalize the par value of additional shares issued
How is stock dividend recorded when the equity method is used?
No journal entries are made. Only a memorandum entry reducing unit cost.
What’s the Journal entry for a stock dividend?
Debit Retained Earnings
Credit stock dividend distributable
Credit APIC (difference)
How are property dividends measured?
At Fair value
How is a property dividends recorded when declared?
Dr Retained earnings
Cr Property dividend payable
How are property dividends recorded when paid?
Dr property dividend payable
Cr Inventory
