ACCT312 3rd Exam

When calculating the change in cash due to operating expenses, what balance sheet accounts do you look at?

-Accrued Expenses Payable (add decr in acct) -Prepaid Insurance (add increase in acct)

What are the typical rights of preferred shares?

-typically have a preference to a specified amount of dividends -preference as to the distribution of assets in liquidation -shares might be convertible or redeemable

What are the four parts of comprehensive income?

1) Net holding gains (losses) on A-F-S securities 2) Gains (losses) from and amendments to post-retirement plans 3) Deferred gains (losses) on derivatives 4) Adjustments from foreign currency translation

For calculating diluted EPS, what do you assume for the calculation of convertible stock or stock options?

Assume that they were exercised at the beginning of the year or when issued if that date is later

Why are inventories treated differently from PPE and intangible assets when classifying their cash effects if they are all acquired for the purpose of producing revenue?

Bc inventory typically is purchased for the purpose of being sold as part of the firm's current operations, while the other assets are purchased as investments to benefit the business over a relatively long period of time

Marketable equity securities are categorized as what type of activity?

Investing

What are the two accounts that are used in the journal entry of treasury stock?

PIC and Treasury Stock

What journal entry is used when reclassifying a stock split?

RE xx Common Stock xx

Payments made by a corporation to retire its own shares are viewed as...

a distribution of corporation assets to shareholders

When shares are sold for cash, what accounts are credited?

capital stock at par value

When restrictions are lifted on restricted stock units for par value stock, paid-in capital restricted stock is replaced by...

common stock pic - excess of par

If preferred shares must be redeemed by a certain date, then they must be classified as...

debt

What is not reported using the direct method?

depreciation expense (anything that doesn't directly impact the cash account) (add these to the cash account in the indirect method)

Which is investing and which is an operating adjustment: gain from sale of land or proceeds from sale of land?

gain from sale = noncash op. adjusting proceeds = investing activity

How are mandatorily redeemable shares are classified as?

liabilities

What is an s-corp?

limited liability but income and expenses are passed through, avoiding taxation, owner limit

What does a retained earning restriction communicate?

management's intention to withhold assets represented by a specified portion of the retained earnings balance

The effect of share issue costs is to...

reduce paid-in capital in excess of par

For stock dividends (25% or less), the fair value of additional shares distributed is transferred from....

retained earnings to paid in capital

If dividends are paid that exceed the amount of assets earned by the company, then management is in effect...

returning to shareholders a portion of their investments

Even without a receipt of cash to establish the fair value of the shares, the transaction still should be recorded at....

the grant-date fair value of shares to be issued

What is the primary source of paid in capital?

the investment made by shareholders when buying preferred and common stock

Share issue costs reduce...

the net cash proceeds from selling the shares and thus paid in capital

If more than one class of shares is authorized, what type of information must be authorized?

-designation to distinguish each class -specific rights for each class

What are the qualities of corporation?

-limited liability -ease of raising capital -ownership transfer -double tax -paperwork -shareholders don't have a mutual agency relation

State laws regulate which of the following corporate activities? -amount of debt allowed -issuance of stock -repurchase of stock -acquisition of assets -nature of share authorization

-nature of share authorization -issuance of stock -repurchase of stock

Both OCI and NI are reported ______________ in the statement of comprehensive income and AOCI and on a ____________ basis as part of retained earnings

-periodically -cumulative

What is treasury stock?

-reaquired shares that are essentially the same as shares that were never issued at all **not voting rights **no dividends

Ownership rights held by common stockholders, unless specified by agreement with the shareholders are as follows:

-right to vote on matters -right to share profits when dividends are declared -right to share in distribution of assets (liquidation) -preemptive right

Not only was par value assumed to be __________________, but it also was defined by ___________________

-the amount invested by shareholders -early corporation laws as the amount of net assets not available for distribution to shareholders

Historically, par value indicated...

-the issue price of all shares -the amount of net assets that were not -available for distribution to shareholders. the real value of shares

What are the four classifications of stockholder's equity?

1) Paid in capital 2) Retained earnings 3) Treasury stock 4) AOCI

What are the types of corporation?

1) formed by private individuals for profit 2) not for profit

What do the articles of incorporation need to include?

1) the nature of activities 2) the shares to be issued 3) the composition of the initial board of directors

For calculating EPS, if no preferred dividends are declared, what adjustments are needed?

For CUMULATIVE - subtract from net income what should have been paid out as a dividend None for NONcumulative

What accounts are used for the journal entry for declaration and distribution of stock dividend?

RE (use mrkt value) Common stock (use par value) Paid-in capital (plug)

What are the journal entries for the retirement of stock?

cash xx common stock xx paid-in-capital xx

What are the journal entries for treasury stock?

cash xx treasury stock xx paid-in-capital xx

When treasury stock is debited, the shares are considered to be _____________ but not ______________

issued but not outstanding

What is the preemptive right?

the right to maintain one's percentage share of ownership

What is a liquidating dividend?

when a dividend exceeds the balance in retained earnings