Chapter 15

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Author:
atcannon
ID:
285509
Filename:
Chapter 15
Updated:
2014-10-11 17:18:05
Tags:
Accounting 302
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Description:
review
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  1. Stock Authorized includes:
    • Unissued-available for sale, 
    • Issued-sold
    • Treasury stock-bought back
  2. Issued Stock
    Stock Authorized - Unissued stock
  3. Outstanding Stock
    Issued Stock - Treasury Stock
  4. Becoming a Corporation
    • Submit articles of incorporation to the state
    • State issues corporation charter recognizing as legal entity
    • Delaware has favorable tax and regulatory environment for corporations
  5. Stock Rights (4)
    • Share in profits and losses
    • Share in management (voting rights)
    • Share in corporate assets upon liquidation
    • Share in new issues of stock of the same class-pre-emptive rights
  6. Preemptive rights
    prevents dilution of ownership interest
  7. Common stock
    • Basic ownership
    • no guarantees
    • bears most risk of loss
  8. Preferred Stock
    • gives up rights for certain preferences or privileges
    • such as voting rights for assurance of dividends
  9. Par value Stock
    Journal entry of issueance
    • Debit: Cash
    • Credit: Common stock (par)
    • Credit: APIC (rest above par)
  10. No par value Stock
    Journal entry at cost
    • Debit: Cash
    • Credit: Common Stock
    • use market value
  11. No par value Stock
    Journal entry at stated value
    • Debit: Cash
    • Credit Common Stock (sv)
    • Credit: APIC (rest above sv)
    • use stated value
  12. Stock Sold Below Par
    very rare for a person to buy stock below par because it creates a contingent liability if the company goes bankrupt. The buyer would owe the difference from purchase price to par value.
  13. Stock Issue Cost
    Not recorded in a separate account and amortized. They decrease net cash from sale and decrease additional paid in capital
  14. Stock Issue Cost
    Journal entry
    • Debit: Cash (sic subtracted)
    • Credit: Common Stock (par)
    • Credit: APIC (sic subtracted)
  15. Stock for Services-non cash
    • A value must be determined by: (in order)
    • 1. Fair value of stock
    • 2. Fair value of services
    • 3. Appraisal
    • 4. Board of Directors
  16. Stock for Services-non cash
    Journal entry
    • Debit: Expense
    • Credit Common Stock (par)
    • Credit: PIC (difference from par to value)
  17. Lump-Sum Sale
    Preferred and Common
    proportional method
    you know the FMV of both and using those amounts create a ration weighted average to multiply against the amount collected
  18. Lump-Sum Sale
    Preferred and Common
    incremental method
    you know the FMV of only one item and you record that amount for what you know and allocate the rest to the other item
  19. Lump-Sum Sale
    Preferred and Common
    journal Entry
    • Debit: Cash
    • Credit: Preferred Stock (par)
    • Credit: Common Stock (par)
    • Credit: APIC-preferred
    • Credit: APIC-common
  20. Lump-Sum Sale
    Other types of sales
    • still choose between incremental and weighted method depending what information you have.
    • add your accounts and related accounts as necessary
  21. Lump-Sum Sale
    Common Stock and Bonds
    Journal Entry
    • Debit: Cash
    • Debit: Discount
    • Debit: Bond Issue Cost
    • Credit: Premium
    • Credit: Bond Payable
    • Credit: Common Stock
    • Credit: APIC
  22. Lump-Sum Sale
    Common Stock and Detachable Stock Warrants
    Journal Entry
    • Debit: Cash
    • Credit: Common Stock
    • Credit: APIC-CS
    • Credit: APIC-Stock Warrants
  23. Treasury Stock
    Cost Method-buy back
    Journal Entry
    • Debit: Treasury Stock (buy-back price)
    • Credit: Cash
  24. Treasury Stock
    Cost Method-reissue
    Cash > TS cost
    Journal entry
    • Debit: Cash
    • Credit: Treasury Stock (buy-back price)
    • Credit: APIC-TS
  25. Treasury Stock
    Cost Method-reissue
    Cash < TS cost
    Journal Entry
    • Debit: Cash
    • Debit: APIC-TS or RE(if TS is 0)
    • Credit: Treasury Stock
  26. Treasury Stock
    Cost Method-retire
    Original price > TS Cost
    Journal Entry
    • Debit: PIC (original)
    • Debit: CS (par)
    • Credit: Treasury Stock
    • Credit PIC- Retirements
  27. Treasury Stock
    Cost Method-retire
    Original price < TS cost
    Journal Entry
    • Debit: PIC-Retire or RE (if PIC-R is 0)
    • Debit: PIC (original)
    • Debit: Common stock (par)
    • Credit: Treasury Stock (cost)
  28. Cash Dividend
    Declare and Distribute
    Journal Entry
    • Declare:
    • Debit: RE or Dividend
    • Credit Dividend Payable
    • Distribute:
    • Debit: Dividend Payable
    • Credit: Cash
  29. Property Dividend
    Adjust asset to fair market value. Determine gain or loss
  30. Property Dividend
    Declare and distribute
    Journal entry
    • Declare:
    • Debit: Property
    • Debit/Credit: Loss or Gain
    • Debit RE or Dividends
    • Credit Div Payable
    • Distribute:
    • Debit: Div Payable
    • Credit: Property
  31. Liquidating Dividends
    There is no Retained earnings available for dividends so dividend is given from contributed capital
  32. Liquidating Dividends
    Declare and Distribute
    Journal Entry
    • Declare:
    • Debit: APIC
    • Debit: RE
    • Credit: Div Payable
    • Distribute:
    • Debit: Div Payable
    • Credit Cash
  33. Stock Dividend
    • Retained Earning is capitalized for fair market value or par. Stock holders continue to maintain percentage of ownership.
    • Small % <20-25 Use market value
    • Large % > 20-25 use par value
  34. Stock Dividend-small
    Declare and Distribute
    Journal Entry
    • Declare:
    • Debit: RE or DIV
    • Credit: CS-Distributable (par)
    • Credit: APIC (mv)
    • Distribute
    • Debit: CS-Distributable
    • Credit: Common Stock
  35. Stock Dividend-large
    Declare and Distribute
    Journal Entry
    • Declare:
    • Debit: RE or Div
    • Credit: CS-Distributable (par)
    • Distribute:
    • Debit: CS-Distributable
    • Credit: Common Stock
  36. Stock Dividends
    Effects on various components
    JE, T S/Eq, CC, Par, Shares O/S, A, EPS, APIC
    • JE: Debit-RE Credit-CS, APIC
    • T S/FEq: no effect
    • CC:  increase
    • Par: no effect
    • Shares O/S: Increase
    • A: no effect
    • EPS: decrease
    • APIC: increase
  37. Stock Spits
    Effects on various components
    JE, T S/Eq, CC, Par, Shares O/S, A, EPS, APIC
    • JE: none
    • T S/Eq: no effect
    • CC: no effect
    • Par: decrease
    • Shares O/S: increase
    • A: no effect
    • EPS: decrease
    • APIC: no effect
  38. Dividend Preferences
    non-cumulative
    cumulative
    • non-cumulative-current years dividends
    • cumulative-current and dividends in arrears
  39. Dividend Preferences
    participating
    non-participating
    • non participation-current % dividends only
    • participation-current and additional dividends shared
  40. dividend preferences
    Participating
    calculations
    • dividend % multiplied by par value of shares for preferred and common
    • afterward the weighted average is used to split the rest
  41. Stockholder Equity Section
    • Preferred stok
    • Common stock
    • Additional paid in capital:
    • preferred, common, treasury
    • Retained earnings
    • Treasury Stock

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