RSM221 Midterm Prepare Note

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University of Toronto St. George
Rotman Commerce
Michael Khan

10/12/2012 12:16:00 PM Recording investment Cost FV-NI FV-OCI Significant influence  20-50 owner  qualitative criteria: ASPE equity or cost method IFRS cost method Journal entry, when SI, record investment Strategy management  long term investment for a company Impairment Carrying Value - RA (greater of faire value and value you use ) Impairment Shareholder’s equity 10/12/2012 12:16:00 PM Lec 5 oct 10 shareholders Public/private sector Why issue share  easy to change ownership, gain finance Share system: Shares can be put into classes, every share have to be equal within class Rights: 1-3 4.preemptive right if the company is generating new share, the exiting shareholders have the right to buy new shares before the public could buy [以防股份被稀释]  advantage: share easy to transfer, could see any time/price common shareholders, preferred shareholder PS don't bear the same risk rate as CS CS are the real owner of the company Common share [carry the risks and rewards of ownership] - owner of the company - suffer ultimate risks of losses/ benefit of success - right to management through the voting right In-substance common shares Preferred share, PS [prefer shareholder] - get dividends/claim to assets on dissolution before common shareholders - sacrifice the right in management/voting right  not guarantee to get the amount/portion dividend but once the company issue dividend, PS got it before CS Features: - cumulative: PS get dividend every year, if the company not pay in current year, it will cumulative to next year, arrears must pay out before distribute profit to CS[not regard as A/P, because its not dividend until it declare] - convertible: may exchange PS to CS at a ratio - callable/ redeemable: corp. can repurchase the share from PS /option for Corp. - retractable: PS can sell back the shares to the corp. at any time / option for PS  when PS is called for redemption, arrears must be paid - participating: participating in profit, may receive extra return if the CS has a higher return then the original PS rate?  how to determine ‘fully participating’? Limited liability of SH - shareholder losses restrict on its contribution to the corp. - SH get back the investment only when dissolution Special transaction!!!!!! Reacquisition of shares - Contribution surplus share r sold by subscription= share holder not pay yet] default after 1st payment - funds refunded with no penalty contributed surplus goes to the equity account share issue costs credit share capital as the cost, debit share capital for actual share repurchase - compare acquisition cost to original cost - Contributed surplus will be used retained earning net income/loss cumulating/participating prefer dividend - must know how to make entries for 4 types stock split/stock dividend - entries: SS no journal entry, memo only; SD debit R/E, credit common share - financial statement performance: SS R/E no change, share capital not change, only total number of share increases; SD R/E decreases, share capital and numbers of share increases (depend on ?) - other comprehensive income OCI subset of retain earning ratios for profitability rate of return on common shareholder’s equity payout ratio price earning ratio = Common SHE/ number of shares outstantding book value per share 10/12/2012 12:16:00 PM Lec 4 contract approach won't be test/ test heavily check next week's location TO DOs Midterm gonna be hardddddddd 10/12/2012 12:16:00 PM Lec 3 Liability --> obligation current < 1yr financial liability - measure at FV bank indebtedness - credit line [capacity of being debt, 10 credits cards each have $1K limited, even your debt is 0 currently, the capacity will be take into consideration] A/P N/P - interest-bearing N/P current maturities of long term debt - paying back the long term debt using long term asset,such as land [ still regard as curr
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