When using the cost method for Treasury stock
Common stock is reported on the Balance sheet as the total shares issued at par value
To solve for change in stockholders equity
It equals assets - liabilities
To solve for retain earnings
Change in stockholders equity - (capital stock + additional paid in capital)
When repurchasing common stock
It reduces total ctockholders’ equity and total capital available to the firm.
Making a higher debit-to-total capital ratio and total debit will remain the same
Retain earnings appropriation is used
To restrict earnings available for dividends
When a company appropriates Retain earnings
It moves from unappropriate RE to appropriate RE
Debiting (decreasing) unappropriate RE and crediting (increasing) appropriate RE
The appropriate RE does not affect the income statement
Just reclassification (remaining) within equity
Common stock that contains an unconditional redemption feature should be reported
On the issuer’s books as a liability on the date of insurance
To solve for book value per common shares outstanding
Divide the common stockholder’ equity by common shares outstanding
Treasury stock purchases reduces
Total equity because the company resources to buy back shares, but when fewer shares remain outstanding, equity is spread over fewer shares, thus increasing. The book value per share and reducing treasury stock under the cost method
If there’s no requirement to appropriate retain earning
Then it’s set aside for future purposes to be classified as ‘appropriate’
IF a company declared and paid both current and previous year dividend
You report the current year dividend in arrears that was received in future year as income from continuing operations
When donating TS from a shareholder to the company
It doesn’t change the total shareholder’s equity balances sheet
Are companies allowed to report gains and losses from the treasury stock transactions?
No, only on the income statement
If a foreign currency depreciates
Book a loss on the income statement
Where does unrealized loss on available for sale security
On other comprehensive income, if its realized it goes on the income statement
Where does actual return on pension plan assets?
They will go under income statement, not OCI
Where does amortization of actual pension loss
This will increase other comprehensive income because it would be amortized/write off as a credit
When calculating comprehensive income
Use net income as the beginning , anything CI and OCI would be netted (1-tax rate)
Comprehensive income equals
Net income + OCI (tax affects these items when considering CI
Contingent shares (that are dilutive) are
Included in the basic EPS is (and as of the date) all conditions for issuance are met
