Question

2 yes! 3 4 YES or NO Questions Preferred Stock can take many complicated forms. It might be perpetual or have a fixed maturity, it might be cumulative, redeemable, collateralized or secured in other ways. Under certain circumstances is it possible that US GAAP will force us to record Preferred Stock as a LIABILITY rather than as EQUITY in the balance sheet? In general, should it be true that Earnings cannot be generated from Equity Transactions? An equity investor in one of your subsidiaries is said to have a "non-controlling" interest in that subsidiary so long as they own less than 50% of the subsidiary's voting cquity. Is this "non-controlling interest" to be recorded as a component of Equity in the Balance Sheet? Does US GAAP currently demand or permit the use of a MEZZANINE section in the Balance Sheet? The Treasury Stock account is a contra-equity account that is used to record stock repurchases as long as the repurchased stock is not retired or otherwise destroyed. Is it true that the balance in this contra-equity account carries a POSITIVE sign in the Equity section of the balance sheet? PROVIDE AN ANSWER or FILL IN THE BLANK Sometimes Common Stock is issued as a way to pay for an asset such as land or a patent. Sometimes the asset's value is known and other times it cannot be determined without undue cost. Also sometimes Common Stock's market value cannot be readily determined without great cost because the company is private. Regardless of the item acquired, and regardless of whether Common Stock's market value can be readily determined we use the same type of US GAAP measure to record such transactions. Please name the measure. HINT: FAS157 5 6 2 of 6 1819 words DE O Focus E

Answer 1

1) Answer Yes

Irredeemable preference shares are such shares that entity don't have to retrieve and in this case they are like ordinary shares. Therefore they are recorded as part of equity in the balance sheet.

2) Answer Yes

Earning cannot be generated from equity transaction.

3) Answer Yes

Non-controlling interest (NCI) is a component of shareholders equity as reported on a consolidated balance sheet which represent the ownership interest of shareholders other than the parent of subsidiary. Non-controlling interest is also called as minority interest.

4) Answer Yes

Under U.S. Generally Accepted Accounting Principles (GAAP), a hybrid security classification on the balance sheet is dependent on how the embedded option is influenced by the debt portion. If the act of exercising the embedded option is influenced by the structure of the debt in any way, then the two parts of the hybrid - the debt and the embedded equity option—must be classified in both the liability and stockholder security sections of the balance sheet.

5) Answer No

A contra equity account is a stockholders equity account with a negative balance. This means that the account has a net debit balance. This account reduces the total amount of equity held by a business.

6) Answer Yes

The common stock balance is calculated as the nominal or par value of the common stock multiplied by the number of common stock shares outstanding. The nominal value of a company's stock is an arbitrary value assigned for balance sheet purposes when the company is issuing shares—and is generally $1 or less.