ACCT 302 - Shareholders' Equity (Ch 18)
Steps for a Quasi reorganization
1. Revalue firm's assets 2. Eliminate the deficit balance in retained earnings 3. Date retained earnings
Property Dividends
A non-cash asset distributed as dividends. Also called dividend in kind or a non-reciprocal transfer to owners. Reduces retained earnings.
Shareholders' Equity
Amounts invested by shareholders Amounts earned by the corporation
Net Assets
Assets - Liabilities
Shareholder's equity equation
Assets - Liabilities
Record Common Stock issued above par value
Debit: cash - shares x price per share Credit: Common stock - shares x par per share value Credit: Paid-in Capital - the excess of par (remainder)
Dividends
Distribution of assets the company has earned on behalf of its shareholders.
Non-cumulative Preferred Shares
Dividends not declared in any give year need never be paid.
Other comprehensive income
Non-owner changes in equity that are not reported as part of traditional income.
Four classifications within shareholders' equity
Paid-in capital, retained earnings , accumulated other comprehensive income (AOIC) and treasury stock
Right of Conversion
Preferred shareholders are allowed to exchange shares of preferred stock for common stock at a specific conversion ratio.
Participating Preferred Shares
Preferred shareholders are allowed to receive additional dividends beyond the stated amount.
Cumulative Preferred Shares
Preferred shareholders are allowed to receive all previous years of unpaid dividends (dividends in arrears).
Redemption Privilege
Preferred shareholders are allowed to return their shares for a predetermined redemption price.
Debt
Represents a creditor's interest that must be paid
Equity
Represents and ownership interest in the company
Treasury Stock
Shares of stock that are repurchased and not retired
Liquidating Dividend
The excess when the dividend exceeds the balance in retained earnings.