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Chapter 15: Q5IFRS (page 831)

Question: Explain each of the following terms: authorized ordinary shares, unissued ordinary shares, issued ordinary shares, outstanding ordinary shares, and treasury shares.

Short Answer

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Answer

Authorized ordinary shares, unissued ordinary shares, issued ordinary shares, outstanding ordinary shares, and treasury shares all are part of Shareholders鈥� equity used to determine the total net worth of the company.

Step by step solution

01

Meaning of Authorized Shares

Authorized shares are the overall number of shares that an enterprise is legitimately permitted to issue, as expressed in its articles of incorporation. The number of exceptional offers cannot surpass the number of authorized offers

02

Meaning of Unissued Ordinary Shares

Unissued stock is offered in a company that has been authorized for utilizing, but which has never been issued. These offers cannot be utilized to cast votes in shareholder decisions, nor are they entitled to get profits.

03

Meaning of Issued Ordinary Shares

Ordinary are shares in a company that is owned by individuals who have a right to vote at the company's meetings and to get a portion of the company's benefits after the holders of preference offers have been paid.

04

 Step 4: Meaning of Outstanding Shares

Outstanding shares are the shares accessible with the shareholders of the company at the given point of time after excluding the shares which are bought back by the company and it has appeared as the portion of the owner鈥檚 equity within the liability side of the balance sheet of the company.

05

Meaning of Treasury Shares

Treasury Stock represents offers that were issued and exchanged within the open markets but are afterward reacquired by the company to diminish the number of offers in public circulation.

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Most popular questions from this chapter

1. Which of the following does not represent a pair of GAAP/ IFRS-comparable terms?

(a) Additional paid-in capital/Share premium.

(b) Treasury stock/Repurchase reserve.

(c) Common stock/Share capital鈥攐rdinary.

(d) Preferred stock/Preference shares.

(Preferred Dividends) The outstanding capital stock of Edna Millay Corporation consists of 2,000 shares of \(100 par value, 8% preferred, and 5,000 shares of \)50 par value common.

Instructions

Assuming that the company has retained earnings of $90,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions.

  1. The preferred stock is noncumulative and nonparticipating.
  2. The preferred stock is cumulative and nonparticipating.
  3. The preferred stock is cumulative and participating. (Round dividend rate percentages to four decimal places.)

(Preemptive Rights and Dilution of Ownership) Wallace Computer Company is a small, closely-held corporation. Eighty percent of the stock is held by Derek Wallace, president. Of the remainder, 10% is held by members of his family and 10% by Kathy Baker, a former officer who is now retired. The balance sheet of the company at June 30, 2017, was substantially as shown below.

Asset

Current assets \(22,000

Equipment (net) 450,000

\)472,000

Liabilities and Stockholders鈥� Equity

Current liabilities \(50,000

Common stock 250,000

Retained earnings 172,000

\)472,000

Additional authorized common stock of \(300,000 par value had never been issued. To strengthen the cash position of the company, Wallace issued common stock with a par value of \)100,000 to himself at par for cash. At the next stockholders鈥� meeting, Baker objected and claimed that her interests had been injured.

Instructions

  1. Which stockholder鈥檚 right was ignored in the issue of shares to Derek Wallace?
  2. How may the damage to Baker鈥檚 interests be repaired most simply?
  3. If Derek Wallace offered Baker a personal cash settlement and they agreed to employ you as an impartial arbitrator to determine the amount, what settlement would you propose? Present your calculations with sufficient explanation to satisfy both parties.

The following is a summary of all relevant transactions of Vicario Corporation since it was organized in 2017. In 2017, 15,000 shares were authorized and 7,000 shares of common stock (\(50 par value) were issued at a price of \)57. In 2018, 1,000 shares were issued as a stock dividend when the stock was selling for \(60. Three hundred shares of common stock were bought in 2019 at a cost of \)64 per share. These 300 shares are still in the company treasury.

In 2018, 10,000 preferred shares were authorized and the company issued 5,000 of them (\(100 par value) at \)113. Some of the preferred stock was reacquired by the company and later reissued for \(4,700 more than it cost the company.

The corporation has earned a total of \)610,000 in net income after income taxes and paid out a total of $312,600 in cash dividends since incorporation.

Instructions

Prepare the stockholders鈥� equity section of the balance sheet in proper form for Vicario Corporation as of December 31, 2019. Account for treasury stock using the cost method.

On February 1, 2017, Buffalo Corporation issued 3,000 shares of its \(5 par value common stock for land worth \)31,000. Prepare the February 1, 2017, journal entry.
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