ACTG 352 Equations and terms

Shareholders Equity Equation

Assets-Liabilities=SE

Amounts invested by shareholders in the corporation

Paid-in capital

Amounts earned by the corporation on behalf of its shareholders.

Retained earnings

PIC Accounts on a Balance Sheet

Capital Stock: (All Stocks)
Preferred Stock
Common Stock

APIC:
All PIC—Accounts

AOCI Accounts on a Balance Sheet

Gain/loss on AFS investments (unrealized)
Net unrecognized gain/loss on pensions
Deferred gain/loss on derivatives
Adjustments from foreign currency translation

When a loss, it’s credited, when a gain, it’s debited.

Comprehensive income

total nonowner changes in equity for a reporting period.

Accumulated other comprehensive income (AOCI)

the sum of all the OCI that has been reported in current and prior periods

If a corporation has only one class of shares…

they typically are labeled common shares

Expected rights of preferred shareholders

1. They get priority dividend payments from the company over common shareholders.

2. They customarily have a preference (over common shareholders) as to the distribution of assets in the event the corporation is dissolved.

Company sells shares, they have an x par per share and a y market value per share.

Cash=shares*y
CS=shares*x
PICEOP=Cash-CS (Or x-y*shares)

Company sells no par common shares for x per share

shares*x

Cash/CS

Company issues shares for equipment. Par is x per share and refutable source says market price is y.

Equipment=shares*y
CS=shares*x
PICEOP=Equipment-CS (Or x-y*shares)

Company issues common shares at x par per share and preferred shares at y par per share for a lump sum price. A refutable source says market price is z.

Cash=lump sum price
/
CS=x*common shares
PICEOP,Common=(x*z)-CS
Prefs=y*preferred shares
PICEOP, Pref=Lump Sum-CS-PICEOP,Common-Prefs

On starting month, company declares cash dividend of x per share on its shares, payable to shareholders on r date, to be paid l date

Starting month
Amount:x*shares
RE/CDP

r date
No entry

l date
Amount:x*shares
CDP/Cash

Distribution of dividends to preferred shareholders
The shareholders’ equity section of Cardenas Enterprises includes the items shown below. The board of directors

declared cash dividends of $360,000, $500,000, and $700,000 in its first three years of operation—2026, 2027, and 2028, respectively.

Common stock	$3,000,000
Paid-in capital—excess of par, common	9,800,000
Preferred stock, 8%	6,000,000
Paid-in capital—excess of par, preferred	780,000

The preferred shareholders are entitled to dividends of $480,000 (8% × $6,000,000).

Solution:

	Preferred	Common
2026	$360,000*	$0
2027	500,000**	0
2028	580,000†	120,000

Explanation: The preferred shareholders are entitled to that amount EVERY YEAR. And when they don’t get it in one year, that amount carries over to the next year.

	Carryover/Common Calculation
2026	480,000-360,000=120,000 Carryover
2027	120,000+480,000=600,000-500,000=100,000 Carryover
2028	100,000+480,000=580,000 700,000-580,000=120,000 Common Dividends

Conclusion: No one gets to eat until the preferred shareholders get to eat.

Stock Split Determination

A stock split is a stock distribution of 25% or higher and is also known as a “large” stock dividend.

Company declares and distributes a 2 for 1 stock split effected in the form of a 100% stock dividend (amount of shares), when the market value of the x par common stock is y per share.

journal entry that summarizes the declaration and distribution of the stock split effected in the form of a stock dividend.

x*shares
PICEOP/Cos

Share-based awards

forms of payment whose value is dependent on the value of the company’s stock

In a restricted stock award…

shares are issued in the name of the employee on the date of grant, subject to certain restrictions and forfeiture

Recording the issuance of restricted share awards

Debits: Contra-equity—deferred compensation (5 million shares at $12)

Credits

Common stock (5 million shares at $1 par)		xx
Paid-in capital—excess of par (difference)		xx

Account Similarities and differences between RSA’s and RSU’s Credits for Recording the issuance of restricted share awards on the grant date. Restricted stock units on the vesting date,

Debits for RSA’s on grant date:
Contra-equity—deferred compensation (z million shares at $x)
Debits for Restricted stock units on the vesting date
Paid-in capital—restricted stock (z million shares at $x)

Credits for Recording the issuance of RSA’s on grant date. RSU’s on the vesting date,

Common stock (z million shares at $x par)		xx
Paid-in capital—excess of par (difference)		xx

Stock dividends and stock splits equation EPS Equation

Net Income/Shares outstanding+(1+Stock Dividend Distributed)+New Shares*(Months left in years they were sold)*(1+Stock Dividend Distributed)

Reacquired Shares EPS Equation

Net Income/Shares outstanding+(1+Stock Dividend Distributed)+New Shares*(Months left in years they were sold)*(1+Stock Dividend Distributed)-Treasury Shares(Months left in years they were repurchased)

What does weighted average mean?

Accounted for remaining months in year

Basic EPS Equation

Earnings Available to common shareholders

/

Weighted-average number of common shares outstanding

Earnings Available to Common Shareholders Equation

Net Income-Dividends on preferred stock/Shares outstanding+(1+Stock Dividend Distributed)+New Shares*(Months left in years they were sold)*(1+Stock Dividend Distributed)-Treasury Shares(Months left in years they were repurchased)

Stock Options EPS Equation

Net Income-Dividends on preferred stock/Shares outstanding+(1+Stock Dividend Distributed)+New Shares*(Months left in years they were sold)*(1+Stock Dividend Distributed)-Treasury Shares(Months left in years they were repurchased)

Diluted EPS Calculation with Convertible Bonds

Net Income-Dividends on preferred stock+After tax interest savings/Shares outstanding+(1+Stock Dividend Distributed)+New Shares*(Months left in years they were sold)*(1+Stock Dividend Distributed)-Treasury Shares(Months left in years they were repurchased)+Converted Shares