F7M1

Question 1

stockholder’s equity

Answer 1

owner’s claim to the net assets

residual claim on ‘net assets’

Question 2

Legal capital

Answer 2

common stock and preferred stock

Question 3

Earned capital

Answer 3

retained earnings

Question 4

Contributed capital

Answer 4

CS
PS
RE
APIC

Question 5

Capital stock

Answer 5

legal capital, retained by the corproation for the protection of creditors

Question 6

Par value

Answer 6

common stock listed with par value, preferred stock is not

Question 7

Authorized

Answer 7

stock that may be legally issued

Question 8

common stock

Answer 8

basic ownership in a corporation; right to vote; last in line during bankruptsy

NOT guaranteed dividends

Question 9

Common Shareholder’s equity

Answer 9

Total Shareholders equity (A-L)
MINUS: PS
MINUS: PS dividends

Question 10

Shareholder’s equity calculation

Answer 10

asset - liabilities

Question 11

Book value per common share

Answer 11

common shareholder’s equity / outstanding shares

Question 12

Preferred stock

Answer 12

preferences related to dividends

no voting right

preference in liquidation

Question 13

Cumulative preferred stock

Answer 13

dividends in arrears

dividends accumulate

not a legal liability

Question 14

Noncumulative preferred stock

Answer 14

does NOT accumulate dividends

Question 15

Participating preferred stock

Answer 15

share equally and then pro rata with common stock

Question 16

Converitble preferred stock

Answer 16

at the option of the shareholder

Question 17

callable (redeemable) preferred stock

Answer 17

at the option of the corporation

Question 18

Mandatory preferred stock

Answer 18

liability not shareholder’s equity

Question 19

APIC

Answer 19

generally contributed cpaital in excess of par or stated value

could also include sale of TS, liquidiating dividends, conversion of bonds, or small stock dividends

Question 20

retained earnings

Answer 20

earned stockholder’s equity

accumulated earnings during the life of the corporation that has not been paid out in dividends

Question 21

Formula for RE

Answer 21

NI
- dividends DECLARED
+/- prior period adjustments
+/- accounting changes retro

Question 22

Appropriations of RE

Answer 22

revenue restricted for legal/contractual/contingent reasons

reversed after the appropriation has occured

Question 23

JE for appropriation of RE

Answer 23

DOES NOT CHANGE TOTAL RE

DR: RE (unappropriated)
CR: RE (appropriated)

Question 24

OCI

Answer 24

not entered into RE

Question 25

Treasury stock

Answer 25

reduces equity; corproation buying back their own stock either cost or par method

Question 26

Gains and losses treasury stock

Answer 26

gain makes APIC go up losses reduce APIC until it hits 0, then begins hitting RE

Question 27

Adjustments of treasury stock

Answer 27

direct adjustment to equity and NOT included in net income

Question 28

cost method treasury stock

Answer 28

recorded at the buy back costs

Question 29

Par method treasury stock

Answer 29

recorded at par value g/l recognized immediately

Question 30

If the treasury stock was breing retired

Answer 30

replace cash with common stock