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Flashcards in FAR-Stockholder's Equity Deck (25)
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What is the accounting treatment for a property dividend where the the carrying amount of the property is greater than the market value?

It is a loss. Report as a reduction in income before extraordinary items.


How is compensation expenses from stock options grants measured?

If the options are exercisable immediately, expense all immediately based on the value of the stock options.

If the options are excercisable only after a vesting period, ammortize the expense ratably over the lfe of the vesting period


What is the accounting treatment for a property dividend where the the carrying amount of the property is greater than the market value?

Retained Earnings is always Market Value
CV Less than Market Value = Gain
CV Greater than Market Value = Loss


With a property dividend, what date is used to determine the gain/loss?

The date of declaration


In a transaction where bonds are issue together with stock for a fixed price, what is used to determine the value of the bonds, stock price, and APIC?

Bonds are recorded at market value, stocks at par, and the plug is APIC.

*See question 14 from 7/24 quiz


When a cash dividend is declared that exceeds the cash to be allotted to stock holders based on dividend percentages, how is the remaining cash dividend distributed?

The remaining cash dividend to be distributed is allocated based on a ratio. It is the amount of cash from dividend percentage / Total cash paid from all stock dividend percentages. This ratio is then multiplied by the declared dividend remaining.

*See question 21 from 7/24 quiz


Is a stock that does not have a par value able to create additional paid in capital?



What different classes of stock are traded for a non-cash asset (such as land), how is the sale recorded.

The sale is pro-rated. Stock is still recorded at par, but total consideration is pro-rated based on the fair value of the asset on the other end of the transaction.

*See question 42 from 7/24 quiz


When calculating weighted average stocks for the year, how are stock dividends treated?

They are treated as if they were outstanding for the entire year


What interest rate is used to discount the exercise price of an option and its future dividend stream?

The risk-free interest rate


How will the issuance of bonds affect stockholder's earnings?

(From missed question)

Interest expense from bonds will decreased stockholder earnings.


How are dividends on nonconvertible cumulative preferred stock treated in the calculation for Basic EPS?

They are not included


What is the dividends per share ratio?

Total Dividends - Special Dividends / Earnings per share


What is a key consideration when calculating diluted EPS?

When calculating diluted EPS, must assume that money from options is used to purchase shares at market price and then retire them.


The excess of the fair value of the consideration received over the stated value of no par common stock should be credited to:

Additional paid-in capital.


What are issued shares?

Shares outstanding + Treasury shares


How is Basic EPS calculated?

(Net income - dividends paid to or promised to preferred shareholders)/Average Common Shares Outstanding


How is Diluted EPS Calculated?

(Profit or loss attributable to common equity holders of parent company
+ After-tax interest on convertible debt + Convertible preferred dividends)

Divided By

(Weighted average number of common shares outstanding during the period
+ All dilutive potential common stock)


When stock dividends are issued, for the sake of calculating weighted average stock for the year, from the date issued how long are stock dividends outstanding?

Stock dividends are considered to be outstanding throughout the entire year.


In accounting for stock-based compensation, what interest rate is used to discount both the exercise price of the option and the future dividend stream?

The rate of interest used to discount both the exercise price and dividends is the risk-free interest rate.


What is the formula for book value per common share?

Common Shareholders Equity / Common Shares Outstanding


What are the steps to calculating dilutive EPS?

Dilutive EPS
1. Net Income/CS = Basic EPS
2. Decide if shares are dilute; Option Price


What is the calculation for preferred dividends?

Preferred shares*percentage attributed*par value of preferred


What is the difference between cumulative and noncumultive preferred dividends?

Cumulative dividends must be paid
Noncumulative Dividends can be withheld at a company's discretion


When cumulative preferred dividends are in arrears, how are they shown in the corporations statement of financial position?

It's shown as a footnote