ACCT 209 1nd Edition Final Study Guide Lectures 13 14 Note This study guide is organized by topic Corporations Lecture 13 November 19 Equations needed 1 Basic earnings per share Net income pfd dividend weighted average shares outstanding 2 Adjusting RE Beginning Retained earnings Prior period adjustment Restated Beginning RE Definitions needed Common stock type of capital stock issued by every corporation All Companies have stock Authorized shares maximum number of shares that a corporation can issue based on articles of incorporation approved by state government Issued shares number of shares that have been sold to stockholders Outstanding shares number of shares of stock that are currently held by public shares issued less treasury shares Treasury stock issued shares of a corporation s own stock that the corporation has bought back and not retired shown as a reduction of total stockholders equity Par value arbitrary amount assigned to share of stock generally represents required legal capital Preferred stock capital stock that has one or more preferences advantage over common usually preferred as to dividends preferred stockholders receive dividends before common Cumulative unpaid dividends from prior years accumulate must be paid in full before common stockholders can receive dividend Callable issuing corporation can call or buy back issued shares at predetermined price Convertible stockholders have the right to exchange preferred shares for a specified number of the corporation s common shares Cash dividends Company needs to have a positive retained earnings and cash in order to give out dividends Date of declaration Board of directors vote to approve If yes a liability now exists Retained earnings goes down and dividend payable goes up Date of record The cutoff date Date of payment Check is in the mail Dividend payable goes down and cash goes Stock dividends corporation issues additional shares of stock to stockholders Earnings per share Helps compare companies Restricted retained earnings When Board of directors vote to ear mark Retained earnings Restated Earnings Done when an accounting error is found Adjust the Beginning retained earnings What kind of problems are from this section Calculate amount of shares and different types Example on lecture note 13 Calculate cash dividends Use method in example 2 in lecture note 13 Be able to calculate all aspects of stock holder equity from balance sheet Example 3 in lecture note 13 Note Know how bonds compare to capitol stock On lecture note 12 Stock holder rights Voting right 1 share gives 1 vote dividend right Get right to declared dividends liquidation right share in assets remained if liquidated and preemptive right right to buy of new shares Effect of stock dividends RE decreases contributed capital increases total stockholders equity has no change Look at the effect of stock transactions on the balance sheet Statement of Cash Flows Lecture 14 November 26 Equations needed 1 Operating Activates Net Income Depreciation expense depletion amortization expenses Gain or loss Change in CA CL increases in CA other than cash Decreases in CA other than cash Increases in CL decreases in CL Cash Flows 2 Financing cash flows Issue of Stock payment on B P payment on DIV Cash Flow 3 Long Term Asset Beginning balance Cost of new asset purchased original cost of asset sold End Balance 4 Accumulated Depreciation Beginning Balance Depreciation Expense Accumulated depreciation on Assets sold End Balance Definitions needed Statement of Cash flows Shows the Total change in cash and the reasons for change Operating cash flows Transactions that involve producing and selling goods and services Income statement items Ex selling goods and taxes Investing Cash flows Transactions that involve acquiring and disposing of long term assets EX Sale of assets and purchasing investments Financing Cash Flows Transactions that involve obtaining resources long term liability and Stock holder equity EX selling stock Significant non cash transactions Recorded at bottom of cash flow statement or in notes will probably affect cash in the future Indirect method of determining operating cash flows Starts will net income then adjusts for revenues and expenses that did not create an equal change in cash overwhelmingly used in practice Direct Method Shows major categories of gross cash receipts and gross cash payments What kind of problems are from this section Determine if an activity should be shown on statement of cash flows as Operating Investing or financing Example on Lecture note 14 Determine cash flow from a balance sheet Example 2 on lecture note 14 Determine cash flow from purchase of long term assets like land and vehicles Example 3 on lecture not 14 Determine cash flow of bonds Example 4 on lecture note 14 Notes Helpfulness of cash flows Helps predict firm s ability to generate future cash flows to pay dividends and to meet obligations Explains differences between reported net income and cash flows Explains investing and finance cash flows and shows significant non cash transactions Helps evaluate management decisions Notes on Final There will be a couple bond terms on the final There will also be calculations of ratios like on project The last 10 questions The formulas will be given for these just like on the project