F1 M4

If par value exists, how can stock be issued?

Above par, at par, or below par

what are stock subscriptions?

contracts to sell shares on credit before stock is actually issued

journal entry when stock is issued above par?

• Dr Cash (proceeds)

  • Cr Common Stock (par)

  • Cr APIC (excess over par)

Journal entry when stock is issued at par?

• Dr Cash

  • Cr Common Stock

journal entry when stock is issued below par?

• Dr Cash

• Dr APIC (discount)

  • Cr Common Stock

What does selling stock by subscription mean?

Entering a contract to sell shares at an agreed price on credit.

journal entry to record stock subscriptions?

• Dr Subscriptions Receivable

  • Cr Common Stock

  • Cr APIC

how are unpaid subscriptions at year-end classified?

Contra-equity item.

journal entry when subscription is paid?

• Dr Cash

  • Cr Subscriptions Receivable

Journal entry when stock certificates are issued after subscription?

• Dr Common Stock Subscribed

  • Cr Common Stock

What happens if part of a subscription is not collected?

Reverse applicable portion, issue stock proportionately, refund payment, or credit APIC.

What is a stock right?

Right for shareholders to buy additional shares below market price.

Accounting for issuing stock rights?

Memo entry only

Journal entry to exercise stock rights

• Dr Cash

  • Cr Common Stock

  • Cr APIC

How is stock issued for outside services recorded?

At fair value of the stock

How are basket sales allocated?

Based on relative fair market values

dividend

Pro rata distribution to shareholders, usually from earnings.

most common type of dividend

cash dividend

How are preferred dividends expressed?

fixed amount or percentage

date of declaration

liability created; retained earnings reduced.

date of record

Determines eligible shareholders

date of payment

When dividend is actually paida

Are dividends paid on treasury stock?

No.

What are property dividends?

Noncash asset distributions.

How are property dividends recorded?

at fair value of assets transferred.

scrip dividends

Notes payable for dividends paid later

liquidating dividends

Dividends exceeding retained earnings

Effect of liquidating dividends?

Reduce paid-in capital

small stock dividends

Less than 20–25% of outstanding shares.

Journal entry for small stock dividend?

• Dr Retained Earnings

  • Cr Common Stock

  • Cr Paid-in Capital

large stock dividend

More than 20–25% of outstanding shares

Journal entry to declare large stock dividend

• Dr Retained Earnings

  • Cr Common Stock Distributable

Journal entry to distribute large stock dividend

• Dr Common Stock Distributable

  • Cr Capital Stock

Are stock dividends issued on treasury stock?

Generally no

stock split

More shares, lower par value, same total equity

accounting for stock split

Memo entry only

reverse stock split

Fewer shares, higher par value

Are stock splits applied to treasury stock

usually no

What does the Statement of Changes in Shareholders’ Equity show?

Changes in equity components, capital transactions, distributions, retained earnings reconciliation.