Equity
When distributing a stock dividend what are the steps
1. find the difference between the cv (bv) and fv and 2.multiply that by the number of shares to get your gain before taxes on disposal of stock, to be recognized
When collectability is reasonably assured, the excess of the subscription price over the stated value of the no par common stock subscribed should be recorded as
Additional paid-in capital when the subscription is recorded
Par Value Method
At purchase, the treasury stock account is debited for par value, and the contributed capital in excess of par account that was credited when the stock was issued is debited for the original amount recorded. Reissuances are treated as a regular issuance of stock except that treasury stock is credited, rather than common stock.
Cost Method
At purchase, treasury stock is debited for cost. The contributed capital in excess of par account that was credited when the stock was issued is not affected. Reissuances credit the treasury stock account at cost, and the difference between the purchase price and reissue price is recorded in contributed capital from treasury stock.
If a corporation sells some of its treasury stock at a price that exceeds its cost, this excess should be
Credited to Additional PIC
A property dividend should be recorded in retained earnings at the property's
Market value at date of declaration.
outstanding
NO treasury shares,(Stock splits are applied to all outstanding and treasury shares because a split reduces the par value of each share of issued stock, and increases the number of shares in inverse proportion.)
Ole Corp. declared and paid a liquidating dividend of $100,000. This distribution resulted in a decrease in Ole's
PIC, A liquidating dividend is a return of capital. Its source is not earnings, and, therefore, it is not retained earnings. The firm is liquidating part of its permanent capital. The usual account to debit for a liquidating dividend is additional paid-in capital.
Purchasing stock back can only take out of PIC at a limit of what the price over par value per share. additional goes to RE
Par Value: $10 selling price: $15 APIC: $5 Purchase again price:$17 take out $5 from APIC take out of $2 from R/E
Resale of treasury stock. How much to recognize on APIC
Recognize all the difference between resale price and par value
Under the cost method, additional paid-in capital from treasury stock transactions is credited when treasury stock is reissued at a price in excess of cost. This account is to be debited before retained earnings when the opposite occurs: reissue treasury stock at less than cost
Rem
Conversion of PS to CS with already having PIC on the books
Remove PS and PIC from books and credit the amount of the common stock. Also credit the PIC Common Stock.
If the problem says canceling stock that means
That they are buying back stock (treasury stock)
Income is not affected by treasury stock transactions.
Therefore it only shows up in the PIC and cash based on a gain or loss
paid in capital from retirement of preferred stock
This account is used as like a loss on early retirement of stock. Remember to think through JE and it makes equity much easier
When a company declares a cash dividend, retained earnings is decreased by the amount of the dividend on the date of
date declared
Issued shares include
outstanding shares and treasury shares (Stock splits are applied to all outstanding and treasury shares because a split reduces the par value of each share of issued stock, and increases the number of shares in inverse proportion.)
