In each blank, try to type in the
word that is missing. If you've
typed in the correct word, the
blank will turn green.
If your not sure what answer should be entered, press the space bar and the next missing letter will be displayed. When you are all done, you should look back over all your answers and review the ones in red. These ones in red are the ones which you needed help on. Question: If preferred stock is , what does the participating feature mean? cumulative?Answer: 1. fully participating mean if the common shareholders get a greater % dividend then the stated preferred amount, preferred holders would get the higher amount
2. if skip dividends a year, made up to preferred holders before common get dividends Question: If preferred stock is , what does the convertible feature mean? callable?Answer: 1. stockholders have option of exchanging preferred stock for stock at a specified ratio
2. entity has option to repurchase stock at a specified price Question: Do redeemable preferred stock have to be on the balance sheet?Answer: Yes as a liability b/c its an that may force entity to transfer assets/issue equity shares Question: What is the journal entry for a subscription?Answer: Debit: Cash (amount received), subscription receivable (balance)
Credit: common stock subscribed (par), paid-in in excess of par (subscription price > par) Question: When is a stock subscription considered issued stock? entry?Answer: 1. When the subscription price is received
2. Debit: Cash, Credit: Subscription receivable (clear balance)
Debit: Common stock subscribed, Credit: Common stock (at par to show stock is now issued) Question: What happens if a subscription is defaulted?Answer: company can return the money, keep it, or hold to cover any losses on resale and then return the balance Question: When stock is at a par for services performed, what values are used to determine the paid in excess of capital amount?Answer: Market value for the - Par Question: When is issued with other securities for a lump sum, when is the incremental method used? (as opposed to the proportional method) How allocate and Where would additional paid in capital be allocated if there is any?Answer: 1. when the FV of all classes of securities is not determinable
2. known FV security is allocated only FV amount, rest is allocated to other security and excess to additional paid in capital of the Question: When stock is issued with other securities for a lump sum, how is the method calculated?Answer: Find proportion of total FV of all securities and multiply by lump Question: In of stock that contains detachable warrants, what is the allocation of the proceeds based on? If only one FV is known?Answer: 1. the relative FV of stock and warrants
2. use FV of known amount and remaining is to the remaining security (usually resulting in additional paid in capital allocated to that security) Question: Define Answer: Par/ stated value is the assumed of the stock, collecting below Par is thought of as a loss and above par results in additional paid in capital Question: Define stockAnswer: a firm's own repurchased on the open market
- not an asset (owning shares of itself!) serves as reduction of stockholders equity Question: What is the cost for accounting for treasury stock?Answer: treasury stock is debited for the cost of treasury stock
- difference cost and resale price recognized at resale
- above cost, credit paid-in capital from treasury stock
- below cost, charge same or paid in capital retired stock if exist Question: What is the par value method for accounting for stock?Answer: debit treasury stock at par value
- excess > par value debit PIC- CS up to original issue price
- excess > original issue price debit to RE
- > par < original price debit PIC-CS to paid amount, PIC-TS to original price
- resale same as issuanc Question: How is the of stock handled?Answer: Debit Common stock at par value
If loss- Debit RE: over issue price, PIC- excess of par: remove from books, use original issue price.
Credit Treasury Stock (Cash if not already Treasury Stock)
Gains credited to PIC- from retirement account Question: What balance sheet does treasury stock serve to counter balance?Answer: Stockholders is decreased by treasury stock. RE is an account underneath equity, and is not affected by treasury stock. Question: On the date of declaration, what is the to record dividends? On payment?Answer: Debit- RE (dividends)
Credit- payable
Debit- Dividends payable
Credit- Cash Question: What are property ? How are they recorded?Answer: 1. Dividends paid out in an asset other than cash
2. at FV of transferred asset. Gain or loss is recognized based on difference of BV of asset Question: What are dividends? What is debited?Answer: 1. dividend not based on earnings, are a return of capital to stockholders
2. Debit reduce paid-in capital of dividend Question: What are dividends? How recorded?Answer: 1. promise to pay dividends in future, may bear interest
2. Same as regular dividends with possibility of interest expense on payment Question: When stock certificates are as a dividend, does the proportion of ownership change? What's the entry on the declaration date? at issuance? Answer: 1. No
2. Debit- RE: FV of stocks (< 25% increase in stocks) or RE: par of stocks (> 25% increase in stocks)
Credit- dividend distributable: Par of stocks, PIC-excess of par
3. Debit- Stock dividend distributable
Credit- Common stock Question: How is the amount of a dividend distributed between preferred and common share holders? preferred fully participates in dividendsAnswer: take preferred % amount and multiply by total par value for and preferred stocks outstanding. this gives the amount for only preferred. Subtract it from total dividend, allocate remaining based on proportion of total par values for preferred/common Question: What does dividends in arrears mean? how is it ? how is it reported?Answer: 1. unpaid dividends from prior years owed to preferred stockholders
2. amount owed preferred stockholders (% given x total par value) for each year unpaid and subtract by dividends paid
3. as a disclosure Question: What does a stock split do? How is the par affected?Answer: 1. change number of shares and the par value per share
2. reduced in proportion to the increase in number of shares, total par value does not change, so RE is unaffected Question: What is the purpose for the Reserve for RE (or RE) account?Answer: restricts RE to show that assets in the amount of the appropriation are not available for dividends
Debit- RE
Credit- Reserve for RE
Reverse when no longer needed Question: What are share based ?Answer: entity acquires goods/services by issuing shares, share options, or other instruments Question: What are based payments to nonemployees measured on?Answer: 1. FV of the equity instrument or FV of the goods/services. is more reliable Question: Define requisite service period. service date.Answer: 1. period the employee is required to provide services (usually vesting )
2. beginning of the requisite service period Question: When are share-based payments, classified as equity, measured? How? How is compensation expense ?Answer: 1 Grant date FV equity instrument
2 Observable market price op option with similar terms or estimate with pricing model or intrinsic value (market value stock- $ employee pay). All net of amount employee pays
3 straight line over service perio Question: When are share-based payments, as a liability, measured? How? How is compensation expense allocated?Answer: 1. each reporting period. Final measurement is on settlement date
2. FV of liability incurred
3. line over requisite service period Question: What are the accounting for share-based payments classified as equity?Answer: At grant date
Db- Deferred compensation - Stock options outstanding
Amortization (straight-line)
Db- Compensation expense
Cd- Def Comp exp.
Option exercised
Debit- Cash (option price), Stock options outstanding
Credit- CS (par), Addtl PI Question: What is a stock right?Answer: share based payment classified as a liability- allows employees to receive stock or cash equal to the difference between the MV and some predetermined per share for a certain amount of shares Question: What are the accounting entries for share-based payments classified as a ?Answer: readjust each year.
Increase
Debit- Compensation expense
Credit- Liability under SAR plan
Deduction
Reverse above
When redeemed in CS
Replace liability with rights outstanding Question: What are the of income that require a basic EPS calculation?Answer: Income from operations
Net income Question: How is basic EPS calculated for net ?Answer: Net income available to common stockholders/ -avg number of common shares outstanding
- Numerator calculated by taking Net income - dividend declared on noncumulative preferred stock- dividends accumulated on cumulative preferred stock Question: How is EPS calculated for net income from continuing operations?Answer: Net income available to common stockholders/ weighted-avg number of common shares outstanding
- Numerator calculated by NI -income/+loss from discontinued operations, extraordinary items
- take # and - as in basic EPS for net income Question: What is the difference between basic EPS and diluted EPS on equity?Answer: Diluted EPS adds common shares held that would be (convertible preferred stock or bonds) to denominator.
- pretend convert on 1st of year add some interest expense back to numerator (NI) Question: Under what situation would the exercise of options, warrants, etc. be dilutive? anti dilutive? anti means?Answer: 1. average market price > exercise price
2. average market price <= exercise price
3. EPS would stay the same or Question: How are the dilutive affects of and warrants calculated?Answer: (average market price- exercise price)/average price * # shares of options and warrants
- no affect on the numerator Question: In calculating diluted EPS, what happens if convertible bonds or stock werent outstanding the whole year but during it? If converted?Answer: 1. time so multiply by % of year was around
2. net result is the same as if not converted Question: What happens if stock is redeemed in regards to the calculation of diluted EPS?Answer: difference of FV and carrying of preferred stock treated the same as a dividend Question: When calculating diluted EPS how are shares to be issued in the future with no restrictions but time in?Answer: considered issued and treated as Question: In a procedure, what is the statement of affairs?Answer: presents the current market values of the assets and the status of the various of the equity interests of the corporation Question: In what order are equity interests put (from highest to lowest) for a bankruptcy procedure?Answer: preferred claims, fully secured , partially secured creditors, unsecured creditors, stockholders equity Question: What goes in to the statement of for bankruptcy?Answer: starts with the BV of the assets, then relate the projected proceeds from the liquidation of the assets to the equity interests, finishes with the estimated deficiency Question: In reorganizations, what happens to the sheet?Answer: distinguish between events related to reorganization and ongoing operations. Classify like this at expected amounts on BS Question: When is an considered a new entity for reporting purposes after bankruptcy?Answer: value of assets before confirmation < liabilties incurred and voting shareholders before confirmation receive < 50% of the shares of the entity Question: What is a reorganization?Answer: companies to avoid formal bankruptcy proceedins through informal proceedings. ELIMINATES DEFECIT in RE Question: What in a quasi reorganization?Answer: authorization from stockholders & creditors, revaluate assets to current , eliminate deficit by charging paid-in capital, write down adjustments go directly to RE Question: What is it meant by rights?Answer: when more stock is issued existing shareholders have privalage to keep the same % of voting rights Question: What is an stock ownership plan? what happens if payment is secured by employeer?Answer: bonus plan designed to invest in employeers equity securities. sometimes ESOP borrows $ to acquire stock, can be garunteed by employer. debt to liability reduces shareholders equity. amt employer contribute/commit puts in compensation expense Question: What is a dividend ? How is it calculated?Answer: 1. measures percentage of earnings distributed as dividends
2. Per Share/ Earnings Per Share Question: What is BV of common stock? How is it ?Answer: 1. not a measure because assets are carried at historical costs
2. Common Stockholders Equity/ Common Shares outstanding Question: What is rate of on common stockholders equity? How is it calculated?Answer: 1. measures return earned on ivestments in firm
2. NI available to common stockholders/common stockholders equity Question: What is debt to ? How is it calculated?Answer: 1. shows companys to sustain losses
2. total debt, all liabilities/ stockholders equity Question: What are the IFRS set of requirements for reporting equity?Answer: accounting influenced by the laws of a country so is no set of requirements |
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