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