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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.
Lindsey Hunter Corporation is authorized to issue 50,000 shares of \(5 par value common stock. During 2017, Lindsey Hunter took part in the following selected transactions.
Instructions
(Trading on the Equity Analysis) Presented below is information from the annual report of Emporia Plastics, Inc.
Operating income | \( 532,150 |
Bond interest expense | 135,000 |
397,150 | |
Income taxes | 183,432 |
Net income | \) 213,718 |
Bonds payable | $1,000,000 |
Common stock | 875,000 |
Retained earnings | 375,000 |
Instructions
The books of Conchita Corporation carried the following account balances as of December 31, 2017.
Cash \( 195,000
Preferred Stock (6% cumulative, nonparticipating, \)50 par) 300,000
Common Stock (no-par value, 300,000 shares issued) 1,500,000
Paid-in Capital in Excess of Par鈥擯referred Stock 150,000
Treasury Stock (common 2,800 shares at cost) 33,600
Retained Earnings 105,000
The company decided not to pay any dividends in 2017.
The board of directors, at their annual meeting on December 21, 2018, declared the following: 鈥淭he current year dividends shall be 6% on the preferred and \(.30 per share on the common. The dividends in arrears shall be paid by issuing 1,500 shares of treasury stock.鈥� At the date of declaration, the preferred is selling at \)80 per share, and the common at \(12 per share. Net income for 2018 is estimated at \)77,000.
Instructions
a) Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously.
b) Could Conchita Corporation give the preferred stockholders 2 years鈥� dividends and common stockholders a 30 cents per share dividend, all in cash?
The term reserves is used under IFRS with reference to all of the following except:
(a) gains and losses on revaluation of property, plant, and equipment.
(b) capital received in excess of the par value of issued shares.
(c) retained earnings.
(d) fair value differences.
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