I3 exam 1 chapter 15

The shareholders' equity of Green Corporation includes $200,000 of $1 par common stock and $400,000 par value of 6% cumulative preferred stock. The board of directors of Green declared cash dividends of $50,000 in 2013 after paying $20,000 cash dividends in each of 2012 and 2011. What is the amount of dividends common shareholders will receive in 2013? A. $18,000. B. $26,000. C. $28,000. D. $32,000.

A. $18,000. [Green's common shareholders will receive dividends of $18,000 as a result of the 2013 distribution. 2011: Preferred = $20k(a) Common = 0 2012: Preferred = $20k(b) Common = 0 2013: Preferred = $32k(c) Common = 18k(remainder) (a)$24,000 current preference (6% x $400,000), thus $4,000 dividends in arrears. (b) $24,000 current preference (6% x $400,000), thus another $4,000 dividends in arrears. (c) $8,000 dividends in arrears plus the $24,000 current preference.] This is because the pref stock people are entitled to 24k dvds a year to you have to make up for the lost time.

Cash DVD

Date of declaration Date of record Date of payment

Property DVD are recorded at

Fair Value at time of declaration

Common stock terms - authorized capital stock, unissued capital stock, issued capital stock, outstanding capital stock, and treasury stock.

Authorized capital stock—the total number of shares authorized by the state of incorporation for issuance Unissued capital stock—the total number of shares authorized but not issued Issued capital stock—the total number of shares issued (distributed to stockholders) Outstanding capital stock—the total number of shares issued and still in the hands of stockholders (issued less treasury stock) Treasury stock—shares of stock issued and repurchased by the issuing corporation but not retired

When treasury shares are sold at a price above cost: A. A gain account is credited. B. A loss is reported. C. A revenue account is credited. D. Paid-in capital is increased.

D

Which of the following transactions decreases retained earnings? A. A property dividend. B. A stock dividend. C. A cash dividend. D. All of the above are correct.

D

non cumulative and Participating stock

In 2020, Mason Company is to distribute $50,000 as cash dividends, its outstanding common stock have a par value of $400,000, and its 6 percent preferred stock have a par value of $100,000. multiple 6% for cs and ps you get ps- 6k cs-24k you have 20k left and there's a total of 500k divide 20k/500k =4% ps 4k cs 16k

small stock dividend 1000 shares $100 par. They issue 10% and the FV is $130 par is $10

When the stock dividend is less than 20-25 percent of the common shares outstanding at the time of the dividend declaration, the company is therefore required to transfer the FAIR VALUE of the stock issued from retained earnings. At date of declaration Retained Earnings (100 × $130) 13,000 Common Stock Dividend Distributable (100 × $100) 10,000 Paid-in Capital in Excess of Par—Common Stock 3,000 At date of distribution Common Stock Dividend Distributable 10,000 Common Stock 10,000

how is stockholder's equity effected by property dvd stock dvd cash dvd

all of them decrease RE

What are the important dates for dividends?

(Declaration, distribution, record, etc.).

What are the components of shareholders' equity

- Additional Paid in Capital - Preferred Stock - Common Stock - Accumulated Other Comprehensive Income - Retained Earnings - Treasury Stock

How would the individual components of stockholders' equity change as a result of a purchase of treasury stock?

- Additional Paid in Capital (increase) - Preferred Stock - Common Stock - Accumulated Other Comprehensive Income - Retained Earnings might increase or decrease - Treasury Stock (increase)

When treasury shares are resold at a price below cost: A. Paid-in capital and/or retained earnings is reduced. B. Paid-in capital and/or retained earnings is increased. C. Retained earnings is always reduced. D. A loss is taken on the income statement.

A

liquidating dividend For example, McChesney Mines Inc. issued a "dividend" to its common stockholders of $1,200,000. The cash dividend announcement noted that stockholders should consider $900,000 as income and the remainder a return of capital.

A dividend declared out of paid-in capital. liquidating dividends. This term implies that such dividends are a return of the stockholder's investment rather than of profits. In other words, any dividend not based on earnings reduces corporate paid-in capital and to that extent, it is a liquidating dividend. At date of declaration Retained Earnings 900,000 Paid-in Capital in Excess of Par—Common Stock 300,000 Dividends Payable 1,200,000 At date of payment Dividends Payable 1,200,000 Cash 1,200,000

incremental method Beveridge Corporation issued 300 shares of $10 par value common stock and 100 shares of $50 par value preferred stock for a lump sum of $13,500. The common stock has a market value of $20 per share, and the value of preferred stock is unknown.

CS 6000 PS 7500

proportional method Beveridge Corporation issued 300 shares of $10 par value common stock and 100 shares of $50 par value preferred stock for a lump sum of $13,500. Common stock has a market value of $20 per share, and preferred stock has a market value of $90 per share.

CS-5400 PS-8100

How is common stock measured and reported at the date of issuance?

Cash Common Stock (par) APIC

proportional method JE Beveridge Corporation issued 300 shares of $10 par value common stock and 100 shares of $50 par value preferred stock for a lump sum of $13,500. Common stock has a market value of $20 per share, and preferred stock has a market value of $90 per share.

Cash 13500 APIC PS 3100 APIC CS 2400 Common Stock 3000 Preferred Stock 5000

cumulative stock

Shares receive priority for future dividends, if dividends are not paid in a given year

treasury stock reissued above cost When the selling price of shares of treasury stock exceeds its cost, a company credits the difference to Paid-in Capital from Treasury Stock. To illustrate, assume that Pacific acquired 10,000 shares of its treasury stock at $11 per share. It now sells 1,000 shares at $15 per share on March 10. Pacific records the entry as follows.

March 10, 2020 Cash 15,000 Treasury Stock 11,000 Paid-in Capital from Treasury Stock 4,000

Treasury stock reissued below cost When a corporation sells treasury stock below its cost, it usually debits the excess of the cost over selling price to Paid-in Capital from Treasury Stock. Thus, if Pacific sells an additional 1,000 shares of treasury stock on March 21 at $8 per share, it records the sale as follows. (they were acquired for $11)

March 21, 2020 Cash 8,000 Paid-in Capital from Treasury Stock 3,000 Treasury Stock 11,000

How is treasury stock displayed in the statement of stockholders' equity?

Pacific subtracts the cost of the treasury stock from the total of common stock, additional paid-in capital, and retained earnings. It therefore reduces stockholders' equity. Treasury stock is a contra equity account recorded in the shareholder's equity section of the balance sheet. Because treasury stock represents the number of shares repurchased from the open market, it reduces shareholder's equity by the amount paid for the stock

Non-Participating Preferred Stock

Preferred stock on which dividends are limited to a maximum amount each year.

Participating Preferred Stock

Preferred stock that shares with common stockholders any dividends paid in excess of the percent stated on preferred stock.

non-cumulative preferred stock

Preferred stock where missed dividends do not accumulate. Only the current dividend is owed before common dividends can be paid.

After eliminating the credit balance in Paid-in Capital from Treasury Stock, the corporation debits any additional excess of cost over selling price to XXXXXX

Retained earnings April 10, 2020 Cash 8,000 Paid-in Capital from Treasury Stock 1,000 Retained Earnings 2,000 Treasury Stock 11,000

large stock dividend Rockland Steel, Inc. declared a 30 percent stock dividend on November 20, distributable December 29 to stockholders of record December 12. At the date of declaration, 1,000,000 shares, par value $10, are outstanding and with a fair value of $200 per share.

Stock dividend that is more than 25% of the previously outstanding shares. In other words, companies transfer from retained earnings to capital stock the PAR VALUE of the stock declaration: Retained Earnings 3,000,000 Common Stock Dividend Distributable 3,000,000 Distribution: Common Stock Dividend Distributable 3,000,000 Common Stock 3,000,000

paid-in capital

The amount stockholders paid in to the corporation in exchange for shares of ownership.

treasury stock par value method Later it resold 500 of the treasury shares at a price of $5 per share. $4 par value

The par (stated) value method records all transactions in treasury shares at their par value and reports the treasury stock as a deduction from capital stock only. Cash 2,500 Treasury Stock 2,000 Additional Paid-In Capital 500

stock split journal entry

To reduce the market value of shares. No entry recorded for a stock split. Decrease par value and increase number of shares.

Share Repurchase is also known as

Treasury Stock

Common stock dividends

based on market value

What is the difference between the common stock account and APIC?

common stock is the par value and apic is the excess amount it sold for

what are the CASH DVDs journal entry Declaration, Record, Payment/Distribution

date of declaration: RE XX DVDs payable XX Date of record: NOTHING Date of payment: DVDS payable Cash

If the preferred stock is cumulative and fully participating, and Mason Company did not pay dividends on the preferred stock in the preceding two years: In 2020, Mason Company is to distribute $50,000 as cash dividends, its outstanding common stock have a par value of $400,000, and its 6 percent preferred stock have a par value of $100,000.

first we do the preferred stock PS 12000 (for two years missed) CS 0 then we do the current year with the % PS 6000 CS 24000 then we take whatever is leftover and figure out the proportions 8k/500k PS 1600 CS 6400

Treasury stock cost method For example, Eastern company repurchases 2,500 shares of its own common stock from stockholders. The par value per share is $10 and company reacquires it for $80 .The entry for this transaction would be made as follows

recognize it as how much it costed. ignore par. Treasury stock 200000 Cash 200000

when you buy back common stock to make it treasury stock. 100 share $1 par $10 per share

recognize the entire cost Treasury stock 1000 Cash 1000

Journal entries and measurement of stock dividends (small vs. large)

small- COST At date of declaration Retained Earnings (100 × $130) 13,000 Common Stock Dividend Distributable (100 × $100) 10,000 Paid-in Capital in Excess of Par—Common Stock 3,000 At date of distribution Common Stock Dividend Distributable 10,000 Common Stock 10,000 large- PAR declaration: Retained Earnings 3,000,000 Common Stock Dividend Distributable 3,000,000 Distribution: Common Stock Dividend Distributable 3,000,000 Common Stock 3,000,000

and how do transactions in SE such as stock issuance, stock repurchase (treasury stock), cash and stock dividends, etc. impact the overall balance of stockholders' equity?

stock issuance- Increase stock repurchase (treasury stock)-Reduce cash DVD-reduce SE stock DVDS- no effect

What is the impact of treasury stock on stockholders' equity, assets and liabilities? Is they purchase them

stockholders equity- decrease assets- decrease by the cash spent liabilities- na