CPA FAR Equity covers stockholders' equity (common/preferred stock, retained earnings, treasury stock) and Earnings Per Share (EPS), focusing on capital structure, dividend, and share transactions. Key topics include calculating basic EPS [(Net Income−Preferred Dividends)/Weighted Average Shares Outstanding], and diluted EPS, accounting for treasury stock (cost/par method), and stock dividends/splits. Stockholders' Equity Components Common Stock: Reported at par value. Preferred Stock: Cumulative dividends are deducted from net income in EPS, regardless of declaration. Non-cumulative... Show more CPA FAR Equity covers stockholders' equity (common/preferred stock, retained earnings, treasury stock) and Earnings Per Share (EPS), focusing on capital structure, dividend, and share transactions. Key topics include calculating basic EPS [(Net Income−Preferred Dividends)/Weighted Average Shares Outstanding], and diluted EPS, accounting for treasury stock (cost/par method), and stock dividends/splits. Stockholders' Equity Components Common Stock: Reported at par value. Preferred Stock: Cumulative dividends are deducted from net income in EPS, regardless of declaration. Non-cumulative dividends are only deducted if declared. Treasury Stock: Contra-equity account, typically recorded at cost, reducing total equity. Retained Earnings: Increased by net income, decreased by losses and dividends. Stock Dividends/Splits: Treated retroactively; No journal entry for stock splits, only memo notation. Earnings Per Share (EPS) Basic EPS: [(Net Income−Preferred Dividends)/Weighted Average Shares Outstanding] Weighted Average Shares: Adjusted for issuance, buybacks, and stock splits, treated "as if" they happened at the start of the period. Diluted EPS: Required for complex structures (options, warrants, convertible bonds/stock). Treasury Stock Method: Used for options/warrants; assumes proceeds from exercise are used to repurchase shares. If-Converted Method: Used for convertible securities; assumes conversion at the beginning of the period, eliminating interest expense (net of tax). Antidilutive: Securities that increase EPS are ignored. Key Ratios Rate of Return on Common Stockholders' Equity: [(Net Income−Preferred Dividends)/Average Common Equity] Debt to Equity: Total Liability / Total Shareholder Equity Show less
CPA FAR Equity covers stockholders' equity (common/preferred stock, retained earnings, treasury stock) and Earnings Per Share (EPS), focusing on capital structure, dividend, and share transactions.
Key topics include calculating basic EPS [(Net Income−Preferred Dividends)/Weighted Average Shares Outstanding], and diluted EPS, accounting for treasury stock (cost/par method), and stock dividends/splits.
Stockholders' Equity Components Common Stock: Reported at par value. Preferred Stock: Cumulative dividends are deducted from net income in EPS, regardless of declaration. Non-cumulative dividends are only deducted if declared. Treasury Stock: Contra-equity account, typically recorded at cost, reducing total equity. Retained Earnings: Increased by net income, decreased by losses and dividends. Stock Dividends/Splits: Treated retroactively; No journal entry for stock splits, only memo notation.
Earnings Per Share (EPS) Basic EPS: [(Net Income−Preferred Dividends)/Weighted Average Shares Outstanding]
Weighted Average Shares: Adjusted for issuance, buybacks, and stock splits, treated "as if" they happened at the start of the period. Diluted EPS: Required for complex structures (options, warrants, convertible bonds/stock). Treasury Stock Method: Used for options/warrants; assumes proceeds from exercise are used to repurchase shares. If-Converted Method: Used for convertible securities; assumes conversion at the beginning of the period, eliminating interest expense (net of tax). Antidilutive: Securities that increase EPS are ignored.
Key Ratios Rate of Return on Common Stockholders' Equity: [(Net Income−Preferred Dividends)/Average Common Equity] Debt to Equity: Total Liability / Total Shareholder Equity
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