Int Acc 2 Exam 3

small stock dividend

Stock dividend that is 25% or less of a corporation's previously outstanding shares. amount that is equal to the fair value of the new shares is transferred from retained earnings to common stock and APIC on the date of declaration

large stock dividend

Stock dividend that is more than 25% of the previously outstanding shares. amount that is equal to the par value of the newly issued shares is transferred from the retained earnings to common stock on the date of declaration

par value method

company reports the treasury stock account as a contra account to the related common stock account that has been repurchased. Upon purchase of the treasury shares the treasury stock account it debited for the shares par value only. when treasury shares are reissued the shares are moved from the treasury stock account at their par value.

journal entries

compensation expense common stock options - apic

cost method

corporation reports treasury stock as a contra equity account deducted from total shareholder's equity before treasury stock. The purchase of treasury stock is recorded at its cost in the treasury stock account and when treasury shares are reissued they are remove from the treasury stock account at their cost.

journal entries for issuance of shares/equity

debit - cash (or expense) credit - par value credit - additional paid in capital (APIC)

treasury stock purchase journal entry

debit - treasury stock credit - cash

treasury stock =

issued shares - outstanding shares

outstanding shares

issued shares that are owned by stockholders

callable preferred stock

issuing corporation can "call" or buy back issued shares at predetermined price

basic earnings per share

net income - preferred dividends / weighted average common shares outstanding

treasury stock is the difference between

number of shares issued and number of shares outstanding

issued shares

number of shares of capital stock that have been legally issued by a company to third parties as of a specific date

equity award

grant date fair value as the measure of compensation

compensatory stock options

grant date fair value of options that vest

Basic Earnings Per Share (EPS)

the amount of a company's profit or loss for a reporting period that is available to the shares of its common stock that are outstanding during the reporting period

legal capital

the amount of stockholders equity that cannot be distributed to stockholders under state law.

stated value

the amount per share assigned (for internal accounting purposes) by the board of directors to no-par stock

Shares Authorized

the maximum number of shares of capital stock a company can issue as determined by its corporate charter

stock subscription

the process of selling stock to investors on an installment basis

cumulative (arrears) preferred stock

the right of preferred stockholders to unpaid preferred dividends of previous years and the current year before a distribution of dividends may be made to common stockholders

dividend preference

the right to a dividend of a predetermine amount before dividends are paid to common stockholders.

Treasury Stock

A corporation's own stock that has been reacquired by the corporation and is being held for future use. (repurchased but not retired)

contra equity account

An owner's or stockholders' equity account with a debit balance instead of the normal credit balance. Examples include the owner's drawing account, a dividend account, and the treasury stock account

Simple Capital Structure

Capital structure that consists of only common stock and nonconvertible preferred stock; consists of no dilutive securities. computed by basic earnings per share

Participating Preferred Stock

Preferred stock that shares with common stockholders any dividends dependent on the participation terms.

convertible preferred stock

Preferred stock with an option to exchange it for common stock at a specified rate.

Diluted earnings per share (DEPS)

The earnings per share after including all potential common shares that would reduce earnings per share.

redeemable preferred stock

either subject to mandatory redemption at a specified price on a specified future maturity date or is redeemable at the option of the holder

par value

face value, it determines the maturity value as well as the dollar value

model for compensatory stock

fair value model