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17 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Stock Issuance Costs
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Initial issuance of Stock, costs are recorded as an expense
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Costs related to later issuances of stock are financing costs and reduces additional paid in capital for the amount of the costs
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Subscription contract example
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Dr Cash (3x 100) 3,000
Dr Subscription Receivable 10,000 Cr Common Stock Subscribed (par $6) 6,000 Cr Additional Paid in Capital 7,000 |
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Subscription payment
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Dr Cash 950 x 10 9,500
Cr Subcscription Receivable 9500 Dr Common Stock Subscribed (#x par) 5700 Cr Common Stock 5700 |
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Components of Stockholders Equity
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Contributed Capital
Capital Stock xxxx Additional Paid in Capital xxxx Retained Earnings xxxx Accumulated Other Comprehensive income xxxx = Total Stockholders Equity |
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Always Record stock at
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Par Value
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Additional amount goes into Additional paid in capital
Cash xxxx Comon Stock Par xxxx Additional Paid in Capital xxxx |
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Combined Sales of Stock
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Selling price is less than if each security was sold individually
Value is based on relative fair value of each security Security 1/all securities in package *(selling Price) to get relative value of security 1 etc |
If only value of 1 security is known, then remaining is allocated to the other security.
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Stock Splits
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Stock split decreases the par value per share of stock and proportionately increases number of shares issued
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Noncompensatory Share Purchase Plan
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1 all employees meet limited qualifications may participate
2 Discount does not exceed market stock issuance cost 3 time to enroll, purchase price based on market price on purchase date |
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Fixed Share Option Plan -Cliff Investing
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1st year calculation
option price x # of Options x forfeiture rate x years to be vested ie 17.15 option x 9000 options x .97 x.97 x.97 for 3 years to be vested |
2nd year same thing recalculated forfeiture rate 3rd year actual numbers used eg
2010 2011 2012 140871 128201 128625 x1/3 x2/3 x3/3 46957 85467 128625 (0) (46957) (85467) 46957 38510 43158 |
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Fixed Share Option Plan Continued
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Dr Compensation Expense 38,510
Cr Common Stock Option Warrants 38,510 |
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Cashing in Options
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Dr Cash (300x 50) 15,000
Dr Cmn Stock Opt War 5,145 (300x17.15) Cr Common Stock 10pr 3000 Cr Additional Paid in Capital 17,145 |
Price recorded is based on exercise price and option price not market price!
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Performance Based Share Option Plan
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also called variable term plan same as fixed but not all terms fixed such as options granted based on performance
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option price x #of Options estimated forfeiture rate ie .97 x.97x.97 for 3 years
options can vary per year based on performance |
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Treasury Stock
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Not an asset. Carried as offset to Stockholders Equity. Cost Method consists of 2 parts, 1) reacquistion of Stock
2) the reissuance that completes the event |
When reissues stocks the cost difference (>) allocated to Additional Paid in Capital When less it is subtracted for Additional Paid in Capital . If no paid in capital available it is deducted from retained earnings.
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Retirement of Treasury Stock
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Dr Common Stock$10 par 1,000
Dr Additional paid in cap 200 Dr Retained Earnings 100 Cr Treasury Stock 1,300 |
as opposed to reissuance $1000 would be debit to cash
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Conversion of Preferred to Common Stock
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Book value method is used not market value method because a corporation can't have a gain or loss on its own capital
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This would violate the concept of income
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Book value method for conversion of preferred to common stock
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Company eliminates the contributed capital par and paid in excess with the par value of the common stock.
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If contributed capital eliminated from preferred is more than common stock par value, it records the excess as increase in additional paid in capital to the conversion. If less, retained earnings are reduced because it is considered a dividend distribution to preferred stock holders
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Example of Conversion of Preferred Stock
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Dr Preferred Stock 50,000
Dr Additional Paid in 10,000 Capital Cr Common Stock 40,000 Cr Additional Paid in Capital from Preferred Stock Conversion 20,000 |
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