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10 Cards in this Set

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  • Back
What is the difference between Shares Issued and Shares Outstanding?
Shares issued is all stock that has been created for sale. Shares outstanding is all stock that is available in the secondary market.
What is treasury stock?
Treasury stock is stock held by the firm for later sale. Counts as part of shares issued, but not as part of shares outstanding.
What is the formula for basic EPS?
(Earnings per common stock share)
Basic EPS = (Income Available to Common)/(Weighted-Average Number of Common Shares Outstanding)

Note that Treasury stock does not count as part of shares outstanding, allowing a corp to boost EPS by buying a large amount of treasury stock.
List differences between Preferred and Common stock
Common: Voting rights, common dividends, Preemptive right, junior claim to proceeds in event of liquidation.

Preferred: Primary claim on dividends & dividends in arrears, NO voting rights, senior claim in liquidation after creditors, Call feature, convertible feature, maturity date.
What is a stock dividend?
Company issues additional shares of stock to shareholders on a basis of their currently held quantity. Requires a journal entry.
What is the journal entry for the purchase of treasury stock under the cost method?
Dr. Treasury stock
Cr. Cash
What is the JE for the sale of treasury stock (Assuming sale price > par)?
Dr. Cash
Cr. Treasury stock for par*shares
Cr. Paid-in Capital for difference
What is the JE for issuance of common stock at a value > par ?
Dr. Cash
Cr. Common stock at par*shares
Cr. Paid-in capital for difference
What is the JE for issuance of Preferred stock (assuming sale price > par)?
Dr. Cash
Cr. Preferred stock at par*shares
Cr. Paid-in capital-PS for difference
What type of account is treasury stock, and what other accounts may it affect?
Treasury Stock is a contra equity item. It is not reported as an asset; rather, it is subtracted from stockholders' equity