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Chapter 15: Q15-2ISTQ (page 830)
Under IFRS, the amount of capital received in excess of par value would be credited to:
(a) Retained Earnings.
(b) Contributed Capital.
(c) Share Premium.
(d) Par value is not used under IFRS
Answer
The correct answer is Share premium, option(c).
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Hatch Company has two classes of capital stock outstanding: 8%, \(20 par preferred and \)5 par common. At December 31, 2017, the following accounts were included in stockholders鈥� equity.
Preferred Stock, 150,000 shares \( 3,000,000
Common Stock, 2,000,000 shares 10,000,000
Paid-in Capital in Excess of Par鈥擯referred Stock 200,000
Paid-in Capital in Excess of Par鈥擟ommon Stock 27,000,000
Retained Earnings 4,500,000
The following transactions affected stockholders鈥� equity during 2018.
Jan.1 30,000 shares of preferred stock issued at \)22 per share.
Feb.1 50,000 shares of common stock issued at \(20 per share.
June 1 2-for-1 stock split (par value reduced to \)2.50).
July 1 30,000 shares of common treasury stock purchased at \(10 per
share. Hatch uses the cost method.
Sept.15 10,000 shares of treasury stock reissued at \)11 per share.
Dec.31 The preferred dividend is declared, and a common dividend of 50垄
per share is declared.
Dec. 31 Net income is $2,100,000.
Instructions
Prepare the stockholders鈥� equity section for Hatch Company at December 31, 2018. Show all supporting computations.
(Dividend Entries) The following data were taken from the balancesheet accounts of Masefield Corporation on December 31, 2016.
Current assets \(540,000
Debt investments (trading) 624,000
Common stock (par value \)10) 500,000
Paid-in capital in excess of par 150,000
Retained earnings 840,000
Instructions
Prepare the required journal entries for the following unrelated items.
(Treasury Stock鈥擡thics) Lois Kenseth, president of Sycamore Corporation, is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation鈥檚 CEO. She decides that buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a 鈥済ood鈥� offer. Kenseth knows the corporation鈥檚 cash position is decent, so it has the cash to complete the transaction. She also knows the purchase of these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share is calculated by dividing net income available for the common shareholders by the weighted-average number of shares outstanding. Therefore, if the number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.)
Instructions
Answer the following questions.
(Equity Transactions and Statement Preparation) On January 5, 2017, Phelps Corporation received a charter granting the right to issue 5,000 shares of \(100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of \)10 par value common stock. It then completed these transactions.
Jan. 11 Issued 20,000 shares of common stock at \(16 per share.
Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the
following assets: equipment with a fair value of \)50,000; a factory
building with a fair value of \(160,000; and land with an
appraised value of \)270,000.
July 29 Purchased 1,800 shares of common stock at \(17 per share. (Use cost
method.)
Aug. 10 Sold the 1,800 treasury shares at \)14 per share.
Dec. 31 Declared a \(0.25 per share cash dividend on the common stock and
declared the preferred dividend.
Dec. 31 Closed the Income Summary account. There was a \)175,700 net
income.
Instructions
(Treasury Stock Transactions and Presentation) Clemson Company had the following stockholders鈥� equity as of January 1, 2017
Common stock, \(5 par value, 20,000 shares issued \)100,000
Paid-in capital in excess of par鈥攃ommon stock 300,000
Retained earnings 320,000
Total stockholders鈥� equity \(720,000
During 2017, the following transactions occurred.
Feb.1 Clemson repurchased 2,000 shares of treasury stock at a price of \)19
per share.
Mar.1 800 shares of treasury stock repurchased above were reissued at \(17
per share.
Mar.18 500 shares of treasury stock repurchased above were reissued at \)14
per share.
Apr. 22 600 shares of treasury stock repurchased above were reissued at \(20
per share.
Instructions
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