AFM291 Study Guide - Midterm Guide: Underlying, Dividend, Treasury Stock
28 Jun 2018
School
Department
Course
Professor
Recycling or no
-
recycling method
○
Issue shares with and without par value
Reduce proceeds of issuing shares when there is direct costs
What happens on default: 3 options.
•
Get rid of receivables
•
Shares subscriptions
-
receivables (contra
-
equity account)
Fair value method & residual method
•
Bundled shares
No journal entries for stock splits
No liability because we are settling in equity
•
Journal entries for stock dividend
Gain go to contributed surplus on re
-
acquisition
Loss go to contributed surplus then retained earnings
Treasury shares
-
not too focused but single transaction method is preferred
Dividend in kind journal entries
Chapter 14
Call options, warrants, futures, forwards, swaps
No values on their own
•
Need to trigger underlying instrument
•
Derivatives
-
derive from underlying instrument.
Value of derivatives will be given in a questions
Need to know how to calculate intrinsic value and time value
Changes in fair value go to net income
•
All derivatives recorded at fair value
In the money and out of the money options
Stock options, SARs.
AFM 391 Page 3
