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Chapter 15: Question 8IFRS (page 831)

Wilco Corporation has the following account balances on December 31, 2017.

Share capital鈥攐rdinary, \(5 par value \) 510,000

Treasury shares 90,000

Retained earnings 2,340,000

Share premium鈥攐rdinary 1,320,000

Instructions

Prepare Wilco鈥檚 December 31, 2017, equity section.

Short Answer

Expert verified

Total Equity of Wilco Corporation is $4,080,000.

Step by step solution

01

Meaning of Shareholders Equity

Stockholders' equity is the difference between the assets of the organization and external liabilities at a specific date. The primary source is money initially and is therefore contributed within the company through share offerings. The second source includes the retained earnings(RE) collected by the company over time through its operations.

02

Preparing Wilco Corporation Equity section

WILCO CORPORATION

EQUITY

December 31, 2017


Share capital-ordinary,$5 par value

$ 510,000

Share Premium-Ordinary

1,320,000

Retained Earnings

2,340,000

Treasury Shares

(90,000)

Total Equity

$4,080,000

Working Notes:

Calculation of share capital

Sharecapital=Shareissued脳Parvalue=102,000脳$5=$510,000

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Most popular questions from this chapter

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.

Before Gordon Corporation engages in the treasury stock transactions listed on the next page, its general ledger reflects, among others, the following account balances (par value of its stock is \(30 per share).

Paid-in Capital in Excess of Par Common Stock Retained Earnings

Common Stock

\)99,000 \(270,000 \)80,000

Instructions

Record the treasury stock transactions (given below) under the cost method of handling treasury stock; use the FIFO method for purchase-sale purposes.

(a) Bought 380 shares of treasury stock at \(40 per share.

(b) Bought 300 shares of treasury stock at \)45 per share.

(c) Sold 350 shares of treasury stock at \(42 per share.

(d) Sold 110 shares of treasury stock at \)38 per share.

What are the different bases for stock valuation when assets other than cash are received for issued shares of stock?

(Stock Dividends and Splits) The directors of Merchant Corporation are considering the issuance of a stock dividend. They have asked you to discuss the proposed action by answering the following questions.

Instructions

  1. What is a stock dividend? How is a stock dividend distinguished from a stock split (1) from a legal standpoint and (2) from an accounting standpoint?
  2. For what reasons does a corporation usually declare a stock dividend? A stock split?
  3. Discuss the amount, if any, of retained earnings to be capitalized in connection with a stock dividend

Washington Company has the following stockholders鈥� equity accounts at December 31, 2017.

Common Stock (\(100 par value, authorized 8,000 shares) \)480,000

Retained Earnings 294,000

Instructions

a. Prepare entries in journal form to record the following transactions, which took place during 2018.

1. 280 shares of outstanding stock were purchased at \(97 per share. (These are to be accounted for using the cost method.)

2. A \)20 per share cash dividend was declared.

3. The dividend declared in (2) above was paid.

4. The treasury shares purchased in (1) above were resold at \(102 per share.

5. 500 shares of outstanding stock were purchased at \)105 per share.

6. 350 of the shares purchased in (5) above were resold at \(96 per share.

b.Prepare the stockholders鈥� equity section of Washington Company鈥檚 balance sheet after giving effect to these transactions, assuming that the net income for 2018 was \)94,000. State law requires restriction of retained earnings for the amount of treasury stock.
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