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Chapter 15: Question 28Q (page 810)
How are restrictions of retained earnings reported?
A debit is recorded for a restriction on retained profits. A deficit is defined as a debit balance in the Retained Earnings account.
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Dagwood Inc. recently noted that its 4% preferred stock and 4% participating preferred stock, which are both cumulative, have priority as to dividends up to 4% of their par value. Its participating preferred stock participates equally with the common stock in any dividends in excess of 4%. What is meant by the term participating? Cumulative?
For what reasons might a corporation purchase its own stock?
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.
Where can authoritative IFRS guidance related to stockholders鈥� equity be found?
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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