Section 2: 30–40%2I
Equity
The equity section of the balance sheet is the owner's claim on assets. The exam tests the components of stockholders' equity, how each component changes, preferred stock features, and earnings per share. Many students lose points on treasury stock and EPS calculations.
What AICPA Wants You to Know
- 1Identify the five components of stockholders' equity and their normal balances
- 2Distinguish cumulative from noncumulative preferred stock and compute dividends in arrears
- 3Apply the cost method for treasury stock purchases and reissuances
- 4Compute basic and diluted EPS using the weighted-average shares method
- 5Record stock dividends (large vs. small) and stock splits