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Finance (FIN300) Intermediate Accounting Chapter 15

Sandra Watson
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National Economics University

Finance (FIN300)

Item Description
Level of
E15-1 Recording the issuances of common stock. Simple 15–20
E15-2 Recording the issuance of common and preferred stock. Simple 15–20
E15-3 Stock issued for land. Simple 10–15
E15-4 Lump-sum sale of stock with bonds. Moderate 20–25
E15-5 Lump-sum sales of stock with preferred stock. Simple 10–15
E15-6 Stock issuances and repurchase. Moderate 25–30
E15-7 Effect of treasury stock transactions on financials. Moderate 15–20
E15-8 Preferred stock entries and dividends. Moderate 15–20
E15-9 Correcting entries for equity transactions. Moderate 15–20
E15-10 Analysis of equity data and equity section preparation. Moderate 20–25
E15-11 Equity items on the balance sheet. Simple 15–20
E15-12 Cash dividend and liquidating dividend. Simple 10–15
E15-13 Stock split and stock dividend. Simple 10–15
E15-14 Entries for stock dividends and stock splits. Simple 10–12
E15-15 Dividend entries. Simple 10–15
E15-16 Computation of retained earnings. Simple 05–10
E15-17 Stockholders’ equity section. Moderate 20–25
E15-18 Dividends and stockholders’ equity section. Moderate 30–35
E15-19 Comparison of alternative forms of financing. Moderate 20–25
E15-20 Trading on the equity analysis. Moderate 15–20
*E15-21 Preferred dividends. Simple 10–15
*E15-22 Preferred dividends. Moderate 15–20
*E15-23 Preferred stock dividends. Complex 15–20
*E15-24 Computation of book value per share. Moderate 10–15
P15-1 Equity transactions and statement preparation. Moderate 50–60
P15-2 Treasury stock transactions and presentation. Simple 25–35
P15-3 Equity transactions and statement preparation. Moderate 25–30
P15-4 Stock transactions—lump sum. Moderate 20–30
P15-5 Treasury stock—cost method. Moderate 30–40
P15-6 Treasury stock—cost method—equity section preparation. Moderate 30–40
P15-7 Cash dividend entries. Moderate 15–20
P15-8 Dividends and splits. Moderate 20–25
P15-9 Stockholders’ equity section of balance sheet. Simple 20–25
P15-10 Stock dividends and stock split. Moderate 35–45
P15-11 Stock and cash dividends. Simple 25–35
P15-12 Analysis and classification of equity transactions. Complex 35–45
CA15-1 Preemptive rights and dilution of ownership. Moderate 10–20
CA15-2 Issuance of stock for land. Moderate 15–20
CA15-3 Conceptual issues—equity. Moderate 25–30
CA15-4 Stock dividends and splits. Simple 25–30
CA15-5 Stock dividends. Simple 15–20
CA15-6 Stock dividend, cash dividend, and treasury stock. Moderate 20–25
CA15-7 Treasury stock, ethics. Moderate 10–15
*This material is presented in an appendix to the chapter.
Master Glossary
(a) A security that is convertible into another security based on a conversion rate. For example,
convertible preferred stock that is convertible into common stock on a two-for-one basis (two
shares of common for each share of preferred).
(b) An issuance by a corporation of its own common shares to its common shareholders without
consideration and under conditions indicating that such action is prompted mainly by a desire to
give the recipient shareholders some ostensibly separate evidence of a part of their respective
interests in accumulated corporate earnings without distribution of cash or other property that the
board of directors deems necessary or desirable to retain in the business. A stock dividend takes
nothing from the property of the corporation and adds nothing to the interests of the stockholders;
that is, the corporation’s property is not diminished and the interests of the stockholders are not
increased. The proportional interest of each shareholder remains the same.
(c) An issuance by a corporation of its own common shares to its common shareholders without
consideration and under conditions indicating that such action is prompted mainly by a desire to
increase the number of outstanding shares for the purpose of effecting a reduction in their unit
market price and, thereby, of obtaining wider distribution and improved marketability of the shares.
Sometimes called a stock split-up.
(d) Contractual rights of security holders to receive dividends or returns from the security issuer’s
profits, cash flows, or returns on investments.
According to FASB ASC 505-20-25-3 (Stock Dividends and Stock Splits):
25-3 The point at which the relative size of the additional shares issued becomes large enough to
materially influence the unit market price of the stock will vary with individual entities and under
differing market conditions and, therefore, no single percentage can be established as a standard
for determining when capitalization of retained earnings in excess of legal requirements is called
for and when it is not. Except for a few instances, the issuance of additional shares of less than 20
or 25 percent of the number of previously outstanding shares would call for treatment as a stock
dividend as described in paragraph 505-20-30-3.
According to FASB ASC 340-10-S99-1 (Deferred Costs and Other Assets—SEC Materials):
Specific incremental costs directly attributable to a proposed or actual offering of securities may properly
be deferred and charged against the gross proceeds of the offering. However, management
salaries or other general and administrative expenses may not be allocated as costs of the offering and
deferred costs of an aborted offering may not be deferred and charged against proceeds of a subsequent
offering. A short postponement (up to 90 days) does not represent an aborted offering.



Finance (FIN300) Intermediate Accounting Chapter 15

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