Company Research Assignment III
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Texas Christian University *
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Apr 3, 2024
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1.
When a company repurchases shares of its own stock, both the assets and stockholder’s equity sections of the balance sheet are affected in a certain way. Under assets, cash and treasury stock have an inverse relationship. There is an outflow of the company’s cash as it is used to purchase back its own shares and an increase to treasury stock, classified as a
contra-equity account under the asset section of the balance sheet. It is important to note that treasury stock consists of shares that have been reacquired, but not yet retired. Acting as a contra-equity account, treasury stock has a negative impact on stockholder’s equity. When a company acquires treasury stock, its issued common stock reduces and if the price the company paid for the repurchasing of its stock exceeds the shares’ original issuance price, additional paid-in-capital will be affected. The difference between the repurchase price and the issuance price determines whether the additional paid-in-capital amount will increase or decrease. Note 15 informs us that in fiscal year 2022, NVIDIA retired its existing 349 million treasury shares. Upon retirement, the treasury shares assumed the status of the company’s
authorized and unissued shares. Circling back to what was mentioned in the previous paragraph regarding the connection between additional paid-in-capital and the repurchase
price of shares, the excess of repurchase price over par value was allocated between additional paid-in-capital and retained earnings. This resulted in a reduction of the company’s additional paid-in-capital account by $20 million and a reduction of $12.0 billion to retained earnings. Under Note 15, NVIDIA also states it repurchased 63 million of its shares for $10.04 billion. Through January 29, 2023, the company has repurchased an aggregate of 1.10 billion shares under its share repurchase program. All of this for a total cost of $17.12 billion. A key takeaway from Learning Objective 20-3 is the importance of properly tracking the price of issuances and repurchases because you cannot take more out of an account than what you put into it. 2.
There is a number of instruments that directly contribute to the dilution of net income per share. Some of these instruments include convertible securities, stock-based compensation plans, stock awards, along with several others. Nevertheless, all of these tools share the ability of causing a diluted net income. In the case that all potential common shares of a company are exercised, all of the previously mentioned instruments can cause a potential decrease in earnings per share. For example, stock grants and awards. Stock grants and stock awards consist of issuing additional shares to a company’s
employees as an incentive to act in the interest of shareholders. Stock awards may become outstanding if certain conditions are not met. Some of these include if an employee were to leave the company prior to the vesting period, the right to the awarded shares would be forfeited. Based on the statement under Note 5, the primary instrument impacting the denominator is the number of outstanding equity awards. However, From the information stated under Note 5, there was a particular instrument excluded from diluted earnings per share. NVIDIA states that equity awards were excluded from diluted net income per share because their effect would have been anti-dilutive.
3.
Overall, there is not one thing I have learned and experienced throughout the course of FR II that I do not believe will serve me useful beyond college. After having taken Fundamentals of Accounting and FR I, I am convinced that Financial Reporting II has been the accounting course that has brought the most value to my personal and professional life. If I were to select one specific topic that I believe will serve me the most useful, I would say taxes. Because it was the most challenging chapter of all is that I
believe it is the one there is the most to learn from. Taxes are a constant force in every individual’s life, regardless of your age, status, or occupation. You see taxes when you go
to the store, when you receive a paycheck, filing taxes is something you dedicate time out
of your personal life to do. It is easy to conclude that taxes will follow me long after I leave TCU. Throughout this upcoming summer, I will be interning at Ernst & Young under their Audit internship program. Understanding taxes is closely related to auditing. As I will be working alongside the team in charge of verifying a company’s financial statements to ensure accuracy and compliance, being able to identify tax-related accounts and their direct impact on financial statement is crucial to ensuring all is accurate. Not only has FR
II taught me how to identify accounts directly correlated with taxes, but it has also helped
me familiarize myself with the different scenarios that impact tax accounting. For example, temporary and permanent differences and their impact on the tax rate. being able to navigate my way through the small components that make up the world of taxes has and will continue to prove valuable as I step into the real world.
I believe my knowledge on taxes will serve me useful when it comes to making informed financial decisions as I begin to build a life of my own. My understanding of taxes has the ability to positively impact my financial well-being both short and long term.
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Related Questions
Which is a correct statement below?
A. Equity is the residual interest in the liabilities of the entity after deducting all of its assets.B. Subscriptions receivable shall preferably be reflected as a deduction from the related subscribed share capital.C. Share premium is also known as capital stock.D. A deficit is a credit balance in retained earnings.
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When a company issues (i.e., sells) common shares to investors in exchange for cash, the effect of this transaction is an increase in assets and an increase in shareholders’ equity.
True
False
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Discuss the propriety of showing:(a) Treasury stock as an asset.(b) “Gain” or “loss” on sale of treasury stock as additionsto or deductions from income.(c) Dividends received on treasury stock as income.
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Choose the incorrect statement below:
A. Retained earnings are the funds contributed by shareholders in excess of par or stated value.B. Equity is defined as the residual interest in the assets of an entity after deducting all of the liabilities.C. Conversion of preference shares into ordinary shares directly affects retained earnings.D. The statement of changes in equity is a formal statement that shows the movements in the elements or components of the shareholders' equity.
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Which of the following is true of a stock dividend?A. It is a liability.B. The decision to issue a stock dividend resides with shareholders.C. It does not affect total equity but transfers amounts between equity components.D. It creates a cash reserve for shareholders.
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The net effect to a corporation of the declaration and payment of a cash dividend is to:
a. increase assets and increase stockholders' equity
b. increase stockholders' equity and decrease liabilities
C. decrease liabilities and decrease stockholders' equity
d. decrease assets and decrease stockholders' equity
A Moving to the next question prevents changes to this answer.
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I need help with these please.
A. Record transfer of net loss to retained earnings.
B. Record transfer of net income to retained earnings.
C. Record repurchase of shares for retirement.
D. Record declaration of cash dividend.
E. Record payment of cash dividend.
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1. Treasury stock is presented on the balance sheet as
an asset.
a liability.
a reduction to equity.
a memorandum in the notes.
2. Under the cost method, when the corporation reacquires its capital stock, it
assumes it will reissue rather than retire the stock.
debits Treasury Stock for the price paid.
credits Cash for the price paid.
does all of these choices
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When stock is purchased with cash and held in treasury,what is the impact on the balance sheet equation?a. No change—the reduction of the asset Cash is offsetwith the addition of the asset Treasury Stock.b. Assets decrease and stockholders’ equityincreases.c. Assets increase and stockholders’ equitydecreases.d. Assets decrease and stockholders’ equitydecreases.
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a. Where should a declared but unpaid cash dividend be reported on the balance sheet?b. Where should a declared but unissued stock dividend be reported on the balance sheet?
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How does the declaration of a cash dividend affect a company’s assets, liabilities, and equity?a. It results in an increase to liabilities and a decrease to stockholders’ equity, while assetsremain the same.b. It results in an increase to liabilities and a decrease to assets, while stockholders’ equityremains the same.c. It results in an increase to assets and a decrease to liabilities, while stockholders’ equityremains the same.d. It results in an increase to stockholders’ equity and a decrease to assets, while liabilitiesremain the same
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Which of the following is true of retained earnings?
Retained Earnings is decreased by net income.
Retained earnings represent cash reserves of a corporation.
Retained earnings represent capital earned through profitable operations.
Retained earnings are an asset on the balance sheet.
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1. What is the accounting for treasury share transactions?
a. On repurchase or re-issuance of previously purchased own shares, no gain or loss is recognized.
b. Treasury shares are accounted for as financial assets.
c. On re-issuance of treasury shares, a gain or loss is recognized equal to the difference between the previous repurchase price and the re-issuance price.
d. On repurchase of treasury shares, a gain or loss is recognized equal to the difference between the amount at which the shares were issued and the repurchase price for the shares.
.
2. If a no-par value share is issued...
a. The value of each share is automatically ₱5.
b. The corporation is automatically in violation of its state charter.
c. There is no legal capital.
d. The entire proceeds is considered as legal capital.
.
3 Which of the following statements relating to bonds is incorrect?
a. None of the choices
b. A bond’s face value is the amount the issuer must pay…
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. If common stock is issued for an amount greater than par value, the excess should be credited to
Cash.
Retained Earnings.
Paid-in Capital in Excess of Par.
Legal Capital
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?With regard to stock dividend, which of the following is true
.Reduces a corporation's assets and stockholders' equity A
.Does not affect total equity, but transfer amounts between the components of equity.B
„The decision to declare a stock dividend resides with the shareholders .C
Transfers a portion of equity from retained earnings to a cash reserve account.D
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1. What is the accounting for treasury share transactions?
a. Treasury shares are accounted for as financial assets.
b. On repurchase or re-issuance of previously purchased own shares, no gain or loss is recognized.
c. On re-issuance of treasury shares, a gain or loss is recognized equal to the difference between the previous repurchase price and the re-issuance price.
d. On repurchase of treasury shares, a gain or loss is recognized equal to the difference between the amount at which the shares were issued and the repurchase price for the shares.
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When a company buys shares of its own stock to be held in treasury, it records a reduction in: B . both assets and shareholders’ equity.
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If a company repurchases its own stock, the journal entry to record this transaction
will cause 'Total Stockholders' Equity to increase on the Balance Sheet.
True
False
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Which of the following statements best describes the effect of treasury stock transactions on assets and stockholders' equity?
O The purchase of treasury stock increases total assets and increases total stockholders' equity.
O The sale of treasury stock increases total assets and may decrease both paid-in-capital and retained earnings.
O The purchase of treasury stock decreases assets and decreases both retained earnings and total stockholders' equity.
O The sale of treasury stock increases total assets and may increase or decrease total stockholders' equity.
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1. If depreciable equipment is sold at a gain, this transaction will appear
the investing activities section only.
the financing activities section only.
both the operating activities and the investing activities sections.
both the operating activities and financing activities sections.
2. Which of the following is true if a company reports an unrealized increase in fair value of available-for-sale securities using an allowance account?
The spreadsheet and statement of cash flows do not reflect this transaction.
The spreadsheet accounts for this transaction, but it is not reflected in the statement of cash flows.
The spreadsheet does not account for this transaction, but it is reflected in the statement of cash flows.
Both the spreadsheet and the statement of cash flows reflect this transaction.
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Which of the following statements is true?
Select one:
a. Dividends paid are classified as a cash outflow from operating activities in the statement of cash flows
b. Losses on the sale of long-term assets are an adjustment reported in the operating activities section of the statement of cash flows under the indirect method
c. Repayment of long-term debt is classified as a cash outflow from investing activities in the statement of cash flows
d. Investment in another company's common stock is classified as a cash outflow from financing activities in the statement of cash flows
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5.
Which one of the following statements is NOT true relating to dividends?
1. Dividends are a portion of the profit of a company divided amongst the shareholders.
2. Dividends need not be declared solely from the profit of the current year and can
include profits from previous trading periods, included in retained income.
3. Dividends can only be declared if approved by the shareholders through their voting
rights.
4. Dividends need only be paid out in cash and cannot be in the form of capitalization
shares.
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At times, companies issue their shares for consideration other than cash. What is the measurement objective in those cases?
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For the following three situations:
A company uses its paid-in capital (in addition to retained earnings) to pay dividends.
A company distributes another company’s shares as dividends.
A company distributes its own shares as dividends.
What types of dividends are involved, respectively? Enter 1, 2, 3, or 4 that represents the correct answer.
1. property dividends, stock dividends, liquidating dividends, respectively.
2. property dividends, liquidating dividends, stock dividends, respectively.
3. liquidating dividends, property dividends, stock dividends, respectively.
4. liquidating dividends, stock dividends, property dividends, respectively.
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I need help with these please.
F. Record transfer of net income to retained earnings.
G. Record issue of stock dividend
H. Record declaration of cash dividend.
I. Record payment of cash dividend.
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i) Central to the previous calculations of company valuations are the payment of dividends. The following terms relating to dividend payment chronology. Define each term in a single sentence
• Ex-dividend date• Record date
• Declaration date• Payment date
• Cum-dividend period
ii) Give two reasons why a company my distribute cash to shareholders via a buyback rather than a dividend
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MAKE UP PRINCIPLES OF ACCOUNTI..
->
? Which of the following is a fixed asset .3
)2 نقطة(
Sum of money borrowed from the
bank
Marketable securities
Shares
Fixtures
Which of the following situations .4
? represents an increase in an asset
)2 نقطة(
Paid cash to a customer
Receipt of equity shares
Receipt of cash from a customer
Payment of dividend to
shareholders
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Related Questions
- Which is a correct statement below? A. Equity is the residual interest in the liabilities of the entity after deducting all of its assets.B. Subscriptions receivable shall preferably be reflected as a deduction from the related subscribed share capital.C. Share premium is also known as capital stock.D. A deficit is a credit balance in retained earnings.arrow_forwardWhen a company issues (i.e., sells) common shares to investors in exchange for cash, the effect of this transaction is an increase in assets and an increase in shareholders’ equity. True Falsearrow_forwardDiscuss the propriety of showing:(a) Treasury stock as an asset.(b) “Gain” or “loss” on sale of treasury stock as additionsto or deductions from income.(c) Dividends received on treasury stock as income.arrow_forward
- Choose the incorrect statement below: A. Retained earnings are the funds contributed by shareholders in excess of par or stated value.B. Equity is defined as the residual interest in the assets of an entity after deducting all of the liabilities.C. Conversion of preference shares into ordinary shares directly affects retained earnings.D. The statement of changes in equity is a formal statement that shows the movements in the elements or components of the shareholders' equity.arrow_forwardWhich of the following is true of a stock dividend?A. It is a liability.B. The decision to issue a stock dividend resides with shareholders.C. It does not affect total equity but transfers amounts between equity components.D. It creates a cash reserve for shareholders.arrow_forwardThe net effect to a corporation of the declaration and payment of a cash dividend is to: a. increase assets and increase stockholders' equity b. increase stockholders' equity and decrease liabilities C. decrease liabilities and decrease stockholders' equity d. decrease assets and decrease stockholders' equity A Moving to the next question prevents changes to this answer.arrow_forward
- I need help with these please. A. Record transfer of net loss to retained earnings. B. Record transfer of net income to retained earnings. C. Record repurchase of shares for retirement. D. Record declaration of cash dividend. E. Record payment of cash dividend.arrow_forward1. Treasury stock is presented on the balance sheet as an asset. a liability. a reduction to equity. a memorandum in the notes. 2. Under the cost method, when the corporation reacquires its capital stock, it assumes it will reissue rather than retire the stock. debits Treasury Stock for the price paid. credits Cash for the price paid. does all of these choicesarrow_forwardWhen stock is purchased with cash and held in treasury,what is the impact on the balance sheet equation?a. No change—the reduction of the asset Cash is offsetwith the addition of the asset Treasury Stock.b. Assets decrease and stockholders’ equityincreases.c. Assets increase and stockholders’ equitydecreases.d. Assets decrease and stockholders’ equitydecreases.arrow_forward
- a. Where should a declared but unpaid cash dividend be reported on the balance sheet?b. Where should a declared but unissued stock dividend be reported on the balance sheet?arrow_forwardHow does the declaration of a cash dividend affect a company’s assets, liabilities, and equity?a. It results in an increase to liabilities and a decrease to stockholders’ equity, while assetsremain the same.b. It results in an increase to liabilities and a decrease to assets, while stockholders’ equityremains the same.c. It results in an increase to assets and a decrease to liabilities, while stockholders’ equityremains the same.d. It results in an increase to stockholders’ equity and a decrease to assets, while liabilitiesremain the samearrow_forwardWhich of the following is true of retained earnings? Retained Earnings is decreased by net income. Retained earnings represent cash reserves of a corporation. Retained earnings represent capital earned through profitable operations. Retained earnings are an asset on the balance sheet.arrow_forward
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Recommended textbooks for you
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
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Accounting
ISBN:9781947172685
Author:OpenStax
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