Chapter 15 Study Guide ACC 302
Chapter 15 Study Guide ACC 302 Acc 302
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This 4 page Study Guide was uploaded by Nicole Nord on Sunday September 20, 2015. The Study Guide belongs to Acc 302 at Ball State University taught by James Schmutte in Fall 2015. Since its upload, it has received 100 views. For similar materials see Intermediate Accounting 2 in Accounting at Ball State University.
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Date Created: 09/20/15
Chapter 15 Accounting 302 Study Guide Vocabulary 1 Additional paid in capital the amount of cash payment received in excess of the par value of stock sold a Example Company A issues 80000 shares of 1 par value stock for cash 500 per share i Cash 80000 5 400000 1 Common Stock 80000 1 80000 Stock a Common stock CS shares sold by a company that give the owner of the shares certain rights within a company i Rights of stockholders 1 To share proportionally in pro ts and losses 2 The right to vote ie control of the management of the company 3 Share proportionately in corporate assets upon liquidation 4 To share in any new issues of stock of the same class ie Common Stock preemptive right protects stockholders from dilution of their interest in the company ii CS shares in the success of the company along with the risk of loss A stockholders interest in the company is determined by percentage of shares held in the company b Preferred Stock PS Preferred stock is similar to common stock but with some different rights Preferred stockholders are guaranteed a dividend while common stockholders are not The tradeoff for this right however is that preferred shareholders do not have voting rights within the company Think of them as a silent partner if you will i Participating preferred stock Will received their stated share of the pro ts and then common stock receives their share Then CS and PS share proportionally in the excess pro ts ii Convertible preferred stock Gives the PS stockholders the right at any time to convert their PS into CS iii Callable preferred stock give the company the right to repurchase the stock at stated future dates at a stated price p835 c NoPar Stock issuance of capital stock without a stated par value d J ournaling issuance of stock Company A issued 600 shares of 10 no par common stock i Cash 6000 1 Common Stock 6000 e Treasury Stock issued stock that is bought back from shareholders by the company These stocks are held for reissue but they are not an asset within the company There are two methods for accounting for the value of treasury stock the cost method and the par value method P 831 3 Dividend in arrears Dividends from past years that have not been paid out to cumulative preferred shareholders a Cumulative preferred stock When a dividend is paid these shareholders are guaranteed back pay for any missed dividends b Noncumulative preferred stock If a dividend is not paid in a previous year then it is lost forever c Stock Split Used to reduce the price of shares outstanding in the market This is a technique used to stimulate trading of shares There is no journal entry for a stock split P844 4 Dividends a Large stock dividend A dividend paid to shareholders usually greater than 20 25 of the shares outstanding but that is not a hard and fast cutoff For the purposes of our exam however it will be obvious if it is a large stock dividend b Property dividends Any dividend payable with assets of the company other than cash Examples include merchandise real estate or investments c Liquidating dividends Dividends based on other than retained earnings for example paying dividends from a paid in capital account This information must be disclosed so shareholders are not lead to believe that the company is operating at a pro t when they are not d Stock dividend the issuance of stock by a company to shareholders without any consideration being received 5 Stockholders equity The total of the net contributions by stockholders plus retained earnings see below for picture p825 Formulas 1 Earnings per share EPS Net Income Preferred Dividends Average Common Stockholders Equity 2 Payout Ratio Cash Dividends Net Income 3 Book Value per share Common Stockholders Equity Outstanding Shares Recording Dividends 1 Cash Dividends Retained Earnings XXX Dividends payabe XXX b No JOURNAL ENTRY NEEDED Dividends payable XXX Cash XXX 2 Property Dividends With property dividends you also need restate the value of the property and recognize any gain or loss Equity investments XXX Unrealized gain or loss XXX Retained earnings2 Property Dividends declared XXX Property Dividends Payable XXX Property Dividends payable XXX Equity Investments XXX 3 Stock dividend Retained earnings XXX Common Stock Dividend Distributable XXX Paid in capital in excess of Par XXX Common Stock Dividend distributable XXX Common Stock XXX 1 There is never a journal entry on the date of record for any dividend 2 This is a debit account Addition Help Problems From Book E152 E153 E155 P155 E157 E1511 E1515 E1515 E1522 P154
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