34

Question 1

what is the accounting for stock rights?

Answer 1

*no JE til exercised
(memorandum entry only)

*exercise of rights:
Dr: cash (amt rec’d)
Cr: CS (par)
Cr: APIC (plug)

Question 2

the SEC was created under which act?

Answer 2

the 1934 securities exchange act

Question 3

what items are considered “retirement” of assets?

Answer 3

• sale of FA
• abandonment of FA
• recycling of FA

*not temporary idling of FA

Question 4

what is the JE for dividends at date of declaration?

Answer 4

Dr: RE
Cr: D/P

Question 5

what is the JE on date of record?

Answer 5

no JE

Question 6

what is the JE on date of pmt for div’s?

Answer 6

Dr: D/P
Cr: cash

Question 7

what is the JE for property div’s?

Answer 7

Dr: RE (FMV)
Dr: AD
Cr: cost of asset
Cr: gain (FMV - NBV)

*record as RE (FMV) on date of delcaration

Question 8

what are scrip div’s?

Answer 8

no cash outflow yet b/c of cash shortage, so they issue a N/P

(includes int exp)

Question 9

what are liquidating div’s?

Answer 9

div’s to SH > RE

*reduces APIC

JE:
Dr: RE (80%)
Dr: APIC (20% excess)
Cr: cash or D/P

Question 10

what is the treatment of small and large stock div’s?

Answer 10

• small (<20-25%)
• reduce RE by FV

Dr: RE (FV)
Cr: CS (par)
Cr: APIC (plug)

.. NC on SE

• large (>20-25%)
• reduce RE by par

Dr: RE (par)
Cr: CS distributable

Dr: CS distributable
Cr: cap. stock

Question 11

what is the statement of changes in SE?

Answer 11

provides “specific info” about changes in an entity’s primary equity comp’s

*has BB/EB SE, CI, div’s declared on CS

Question 12

what is the reporting requirement for statement of changes in SE for GAAP and IFRS?

Answer 12

• GAAP = report either as primary FS or notes

* IFRS + SEC = must report as primary FS

Question 13

what are the only methods that recognize revenue prior to sale?

Answer 13

*when production is the critical event and sales and cost of sales are reas. certain (commodities and % completion contract)

Question 14

what is the JE for noncompensatory SO/purch plans?

Answer 14

no JE til employee buys stock

Question 15

what are the req’s for a plan to be noncompensatory?

no comp exp

Answer 15

• subs. all full-timers meeting limited employee qualifications may participate
• stock is offered to eligible emp’s equally
• time permitted to exercise rights is limited to a reas. period
• any disc. from mkt price is no greater than would a reas. offer of stock to SH’s
• under IFRS, SO’s and stock purch plans are generally compensatory

Question 16

what is the grant date and vesting period?

Answer 16

• grant date = date option is issued (no JE yet) and req’d meas. date for emp. svc’s
• vesting period = period of svc. needed from emp’s to earn right to exercise the options (grant –> vesting)

Question 17

if grant and exercise dates are diff, when are SO’s o/s reduced?

Answer 17

at the exercise date

Question 18

are comp. exp’s relative to SO’s recog’d regardless of whether the options are exercised?

Answer 18

yes, they are

Question 19

what is the JE for comp exp at grant date?

Answer 19

Dr: comp exp
Cr: APIC-SO

Question 20

what is the JE at the exercise date?

Answer 20

Dr: cash (SP)
Dr: APIC-SO (eliminate)
Cr: CS (par)
Cr: APIC (plug)

*EB APIC = cash + APIC elim - CS par