INTERMEDIATE ACCOUNTING II/ Intermediate Accounting, Spiceland/Sepe/Nelson Re: Judgment Case 18-5 Requirement 1. The two alternatives Alcoa has for accounting for the repurchase of it’s shares are: 1) The shares can be formally retired. 2) The shares can be named treasury stock Either way, total shareholders’ equity remains the same. Cash is used to repurchase common stock so the effect is to reduce both cash and shareholders’ equity. This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet.
(c) Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm. (d) Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business. This action is called a tender offer. (e) The announcement of a large issue of new stock could cause the stock price to fall.
Case 2 Solution: Problem Identification: How should a company account for forfeited stock subscriptions? Moreover, do such payments constitute operating or other income? Keywords: Stock Subscription; operating income; additional paid-in capital; owners’ equity; net income; operating income. Conclusion: Per 505-10-25-2, capital transactions that incur no future corporate obligations should be excluded from calculating net or operating income. Thus, the forfeited cash should become part of additional paid-in capital about any
Corporations can acquire a treasury stock by not selling all of the shares of the original stock. By keeping some of the share for the company itself, a treasury stock is created. When a company buys shares of its own stock it will actually increase the value of its stock because the shares will be taken out of the marketplace. By having a treasury stock it also can allow a company to generate cash if it is needed. A treasury stock can affect stockholders because if the company decides to sell the stock then the equity will decrease and the overall assets will also
The acquiring company's basis in the stock of the acquired company is equal to the basis that the shareholder's had in their stock. In order to satisfy the expenses of an acquisition, an acquiring company may use a combination of 2 for 3 stock-for-stock exchange with shareholders of the target company and a tender offer of cash. Where possible, grantees often take advantage of a stock-for-stock exchange, as they usually increase a grantee's ownership position and require no cash outlay. Non-employee shareholders argue that stock-for-stock option price satisfaction adds to the already high expense of granting employees options, as the employees end up not having to pay the option price, which can add up to be a significant amount of cash if all employees granted options take advantage of stock-for-stock
It also has strategies to invest in value stocks, which have high book-to-market ratio and constantly outperformed growth stocks. DFA considers itself as a passive manager because in general DFA sold shares only if a stock no longer fit the portfolio it was in- if a small stock became large, or a value stock became a growth stock. So the constant change of the portfolio structure can be considered as one passive aspect of its strategy whereas precisely matching the holdings of the index portfolio would require DFA to buy discounted stocks in large blocks in which DFA’s traders took several steps to minimize the likelihood that they were being sold a lemon. 2) Who are DFA’s clients, and what are their concerns? What new clients is DFA trying to serve, and what are some of the new issues DFA will face in meeting these clients’ needs?
b. The company must have had zero net income in 2010. c. The company must have paid out half of its earnings as dividends. d. The company must have paid no dividends in 2010. e. Dividends could have been paid in 2010. Companies generate income from their "regular" operations and from other sources like interest earned on the securities they hold, which is called non-operating income. Lindley Textiles recently reported $12,500 of sales, $7,250 of operating costs other than depreciation, and $1,000 of depreciation.
However, pensioners will be hit hard because the extra income they earn from saving will have dramatically reduced, making them worse off. On the other hand, savers may leave the pound for better interest rates in other countries (hot money), causing a fall in the demand for the pound. As a result the value of the pound will fall, making exports cheaper and there will be an injection of net exports. In conclusion, the impact of loose monetary policy will be beneficial to the economy because extra consumption and investment will cause AD to increase which will increase economic growth. However, it takes a long time for changes in interest rates to feed through to consumption and investment and by then the economy may have gotten worse.
What is the difference between a firm’s cash cycle and its operating cycle? A company’s cash cycle is the average length of time from when a firm pays cash for its inventory to when it receives cash from the sale of that inventory. On the other side an operating cycle is the average length of time between when a firm purchases inventory and when it gets the cash for the product. b. How will a firm’s cash cycle be affected if a firm increases its inventory, all else being equal?
By looking at the trading, profit & loss forecast for the year, you can see that things look like they will go reasonably well over the year as it shows a net profit of £15808. You may need to consider the possibility of a rise in fuel prices or the possibility of a fuel shortage in the current climate. This could affect your business by raising the cost of sales. You should look at increasing your revenue figure in order to counteract this. Look at your pricing policy and make changes appropriately.