Distinguish between stock splits and stock dividends. How is each accounted for? What is the economic significance of each?
Answer to relevant QuestionsWhat is retained earnings? What transactions and economic events have an effect on retained earnings? Why is retained earnings considered an indirect investment in an entity? Since the underlying economic activity of an entity isn't affected by accounting choices such as when revenue is recognized or how capital assets are depreciated, why does anyone care what accounting choices an entity makes? Why might a loan agreement limit or prevent the payment of dividends by the borrower? What is the impact on earnings per share if a company buys back some of its shares from investors? What is the economic impact on the company? The shareholders’ equity section of Fogo Ltd.’s balance sheet is shown below:Fogo Ltd.Extracts from the December 31, 2017 balance sheetShareholders’ equityPreferred stock (authorized 100,000; outstanding ...
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