Area 2: Select Balance Sheet Accounts (30-40%)
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| Transaction | Debit | Credit | Key Note |
|---|---|---|---|
| Issue stock at par | Cash | Common/Preferred Stock | Rare — usually issued above par |
| Issue stock above par | Cash | Common Stock + APIC | APIC = excess over par |
| Stock dividend (small, <20-25%) | Retained Earnings (at FV) | Common Stock + APIC | Capitalize at fair value of shares distributed |
| Stock dividend (large, ≥20-25%) | Retained Earnings (at par) | Common Stock | Capitalize at par value only; no APIC entry |
| Stock split | No journal entry | No journal entry | Memo entry — par value per share decreases, shares increase |
| Purchase treasury (cost method) | Treasury Stock (at cost) | Cash | Contra-equity; reduces total equity |
| Reissue treasury above cost | Cash | Treasury Stock + APIC-TS | Excess over cost to APIC-Treasury Stock |
| Reissue treasury below cost | Cash + APIC-TS (+ RE if needed) | Treasury Stock | Deficit first reduces APIC-TS from prior transactions, then RE |
| Cash dividend declared | Retained Earnings | Dividends Payable | Record on declaration date; payable is current liability |
| Event | Debit | Credit |
|---|---|---|
| Grant date (options) | No entry | No entry |
| Each vesting period | Compensation Expense | APIC — Stock Options |
| Exercise of options | Cash + APIC — Stock Options | Common Stock + APIC |
| Forfeiture (actual) | APIC — Stock Options | Compensation Expense (reverse) |
The four major categories of equity transactions that flow through the Statement of Stockholders' Equity. DRIP captures what DRIPs equity value: distributions out (dividends, treasury purchases) and additions in (retained earnings from income, stock issuances).