ACC exam 2 cram

Stockholders' equity

Owners' interest in the company: assets minus liabilities.

Common stock

Basic ownership shares, usually with voting rights.

Preferred stock

Shares that usually have dividend priority over common stock.

Paid-in capital

Value shareholders contribute in exchange for stock.

Par value

Assigned value per share recorded in the stock account.

Additional paid-in capital

Amount received above the stock's par value.

Retained earnings

Accumulated profits kept in the business minus dividends.

Authorized shares

Maximum shares a company is allowed to issue.

Issued shares

Shares the company has issued to investors.

Outstanding shares

Issued shares minus treasury shares.

Treasury stock

Company's own repurchased shares; reduces equity.

Treasury stock purchase

Debit Treasury Stock; credit Cash.

Treasury stock reissuance above cost

Extra amount goes to paid-in capital, not income.

Treasury stock reissuance below cost

Reduce related paid-in capital first, then Retained Earnings if needed.

Stock issued above par

Credit Stock at par; credit excess to additional paid-in capital.

Cash dividend

Cash distributed to shareholders.

Dividend declaration date

Dividend liability is recorded; equity decreases.

Dividend record date

Identifies eligible shareholders; no journal entry.

Dividend payment date

Pay liability with cash; no new equity decrease.

Stock dividend

Additional shares distributed; total equity unchanged.

Stock split

More shares with proportionally lower value per share; total equity unchanged.

Ordinary dividend

Distribution of earnings; reduces Retained Earnings.

Liquidating dividend

Return of contributed capital; reduces paid-in capital.

Retained earnings restriction

Earnings set aside for a purpose; total equity unchanged.

Cumulative preferred stock

Missed preferred dividends carry forward.

Noncumulative preferred stock

Missed dividends do not carry forward.

Dividends in arrears

Unpaid cumulative preferred dividends from prior years.

Participating preferred stock

May receive dividends beyond its regular preference.

Convertible preferred stock

Preferred shares exchangeable for common shares.

Basic EPS

Earnings available to common shareholders divided by weighted-average common shares.

Weighted-average shares

Shares outstanding adjusted for how long they were outstanding.

Diluted EPS

EPS including potential common shares that reduce earnings per share.

Convertible bonds

Bonds exchangeable for common shares.

Dilutive vs. antidilutive

Lower trial EPS = dilutive; higher trial EPS = antidilutive.

After-tax interest saved

Bond interest avoided on conversion, multiplied by one minus the tax rate.