Warren Corporation Was Organized On January 1, 2011

E15 5warren Corporation Was Organized On January 1 2011 With An Auth

Analyze corporate transactions related to stock issuance, treasury stock, dividends, earnings per share, stock options, and complex shareholders’ equity transactions over a fiscal year to determine ending balances, earnings per share, and the statement of retained earnings, with reference to authoritative accounting standards.

Paper For Above instruction

In the realm of corporate accounting, shareholder equity transactions and financial statement preparations are fundamental activities that require precise analysis and adherence to accounting principles. The tasks outlined involve analyzing various transactions related to stock issuance, stock repurchases, dividends, earnings per share calculations, stock options, and other complex equity activities, all within a fiscal year, to produce accurate financial figures and statements.

Firstly, considering Warren Corporation’s stock transactions in 2011, the core task involves determining the balance in the Additional Paid-In Capital (APIC) account at year-end. The company issued shares at different prices and repurchased shares at a different price, with subsequent sale from treasury stock, affecting APIC and other equity accounts. The initial issuance increases common stock at par value and the excess over par is credited to APIC. The treasury stock purchase reduces total equity, but does not affect APIC directly; however, the sale of treasury stock at a different price can result in gains or losses, affecting APIC. The net effect on APIC depends on the original issuance prices, repurchase prices, and resale prices, adjusted for any gains or losses from treasury stock transactions as per authoritative standards (FASB, 2020).

Secondly, calculating the earnings per share (EPS) for Tam Company involves adjusting net income for preferred dividends to find the income attributable to common shareholders, then dividing by weighted-average common shares outstanding. Since new shares were issued during the year, the weighted-average calculations include both the shares outstanding throughout and those issued during the year (FASB, 2018). The preferred dividends paid are deducted from net income to determine earnings available to common shareholders, which are then divided by the weighted-average number of common shares to compute primary EPS. Rounding to the nearest penny ensures precision in financial reporting.

Thirdly, Fountain Inc.’s calculation of basic and diluted EPS involves understanding how to handle convertible securities. The basic EPS uses the weighted-average number of common shares outstanding, while diluted EPS includes the potential shares from conversions of convertible bonds—in this case, 10,000 bonds each convertible into 40 shares—assuming full conversion, which is consistent with the treasury stock method and incremental method (FASB, 2019). The amount of additional shares attributable to these securities must be added to the denominator for diluted EPS calculations, ensuring compliance with the authoritative guidance on complex capital structures (FASB, 2019).

Fourthly, regarding Amos Corporation’s stock options, the market-based approach involves recognizing compensation expense based on the fair value of stock options granted, in accordance with authoritative standards like ASC 718 (FASB, 2020). Since the stock options are granted with an intrinsic value based on the difference between the grant date market value and the exercise price, the options should be valued at $17 per share, and compensation expense is recognized over the service period. The specific expense for 2011 and 2012 should be calculated considering the vesting periods and the total stock options granted (FASB, 2020). This process ensures proper matching of expenses with related periods.

Fifthly, for Trask Corporation’s detailed shareholders’ equity statement, the process involves adjusting for various transactions: issuance of new shares, stock dividends, stock splits, repurchases, treasury stock transactions, property dividends, stock option exercises, and year-end net income, including corrections of prior period understatement. Properly recording these activities involves journal entries that adjust common stock, preferred stock, paid-in capital, treasury stock, retained earnings, and total shareholders’ equity. The stock split, notably, doubles the number of shares and adjusts the par value, with consequential adjustments in accounts per the principles in ASC 260 regarding capital structure changes (FASB, 2018).

Finally, comprehensively compiling the information into a statement of retained earnings involves starting with beginning retained earnings, adding net income, subtracting dividends (cash and property), and adjusting for corrections. For the balance sheet, the shareholders’ equity section summarizes: preferred stock, common stock, additional paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income if applicable, reflecting all transactions and adjustments throughout the year.

In conclusion, performing these analyses requires a detailed understanding of accounting standards, especially ASC 505 for equity transactions, ASC 260 for earnings per share, and ASC 718 for stock-compensation. Accurate computation ensures compliance with financial reporting requirements and provides stakeholders with a transparent view of the company’s financial position and performance (FASB, 2018; 2019; 2020).

References

  • Financial Accounting Standards Board (FASB). (2018). ASC 260 — Earnings Per Share. Retrieved from https://asc.fasb.org
  • Financial Accounting Standards Board (FASB). (2019). ASC 470 — Debt and Convertible Securities. Retrieved from https://asc.fasb.org
  • Financial Accounting Standards Board (FASB). (2020). ASC 718 — Compensation — Stock Compensation. Retrieved from https://asc.fasb.org
  • Warren, C., Reeve, J., & Fess (2020). Corporate Financial Accounting (14th ed.). Cengage Learning.
  • Higgins, R. C. (2018). Analysis for Financial Management (12th ed.). McGraw-Hill Education.
  • Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice (15th ed.). Cengage Learning.
  • Gibson, C. H. (2021). Financial Reporting & Analysis (13th ed.). Cengage Learning.
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  • American Institute of CPAs (AICPA). (2017). Audit Evidence Reporting Standards. AICPA.
  • Pirie, W. (2018). Advanced Financial Accounting. Pearson Education.

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