ACCT 209 1nd EditionFinal Study Guide Lectures: 13 -14Note: This study guide is organized by topicCorporations (Lecture 13 – November 19)Equations needed: 1. Basic earnings per share :(Net income – pfd dividend) / (weighted average + shares outstanding)2. Adjusting REBeginning Retained earnings+/- Prior period adjustmentRestated Beginning REDefinitions needed:Common stock: type of capital stock issued by every corporation; All Companies have stockAuthorized shares: maximum number of shares that a corporation can issue based on articles of incorporation approved by state governmentIssued shares: number of shares that have been sold to stockholdersOutstanding shares : number of shares of stock that are currently held by public; shares issued less treasury sharesTreasury stock: issued shares of a corporation’s own stock that the corporation has bought backand not retired; shown as a reduction of total stockholders’ equityPar value: arbitrary amount assigned to share of stock; generally represents required legal capitalPreferred 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 dividendCallable : issuing corporation can “call” or buy back issued shares at predetermined priceConvertible: stockholders have the right to exchange preferred shares for a specified number of the corporation’s common sharesCash dividends: Company needs to have a positive retained earnings and cash in order to give out dividendsDate 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 dateDate of payment :Check is in the mail; Dividend payable goes down and cash goesStock dividends :corporation issues additional shares of stock to stockholdersEarnings per share: Helps compare companiesRestricted retained earnings: When Board of directors vote to “ear mark” Retained earningsRestated Earnings: Done when an accounting error is found. Adjust the Beginning retained earningsWhat 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 13Note:- 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 sheetStatement of Cash Flows (Lecture 14 – November 26)Equations needed: (1) Operating Activates:Net Income+ Depreciation expense & depletion/ amortization expenses- Gain or + lossChange 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 flowsIssue 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 soldEnd Balance(4) Accumulated Depreciation Beginning Balance+ Depreciation Expense- Accumulated depreciation on Assets sold End BalanceDefinitions needed:Statement of Cash flows: Shows the Total change in cash and the reasons for changeOperating 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 investmentsFinancing Cash Flows: Transactions that involve obtaining resources (long term liability and Stock holder equity) EX: selling stockSignificant non cash transactions: Recorded at bottom of cash flow statement or in notes; will probably affect cash in the futureIndirect 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 practiceDirect Method: Shows major categories of gross cash receipts and gross cash paymentsWhat 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 14Notes:-Helpfulness of cash flows:Helps predict firm’s ability to generate future cash flows, to pay dividends, and to meet obligationsExplains differences between reported net income and cash flowsExplains investing and finance cash flows and shows significant non-cash transactionsHelps evaluate management decisionsNotes on FinalThere 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