Exam 13: Equities

As of January I,2014,the equity section of LD Food Co.'s balance sheet contained the following: outstanding common shares 30,000 issued and outstanding • On May 1,2014,the company spent $802,500 to repurchase 300,000 common shares.These shares were cancelled immediately. • On July 15,2014,the company repurchased and cancelled 4,000 preferred shares at $15/sh. • On November I,2014,the company declared and paid the annual cash dividends on the preferred shares.On the same day,the company issued a 5% stock dividend on common shares.LD Food's stock traded at $7/share after the dividend. Requirement: Record the journal entries for the above transactions occurring in 2014.

Explain the meaning of "contributed capital" and "common share." What distinguishes a common share from a preferred share?

Below are details relating to balances for the equity accounts of Cauvet Company,and changes to those balances.Note that AOCI is accumulated other comprehensive income. Requirement: Prepare a statement of changes in equity for the years ended December 31,2011 and 2012.

Which statement about contributed surplus is correct?

Great-West Lifeco Inc.announced the following share issuances: March 1,2008 10,000,000 2% non-cumulative five-year rate reset first preferred shares (series J)for par value of $12 each.After five years the dividend rate will be reset to the five-year Canada bond rate plus 3.35%.Dividends are payable as declared by the board of directors. April 9,2008 28,350,000 common shares for $19.25 per share.This represents approximately 4.6% of Lifeco's total outstanding common shares. The CEO of the company stated the following regarding these share issuances: For many years,Great-West Life and its subsidiaries have pursued a risk-averse strategy with respect to both liabilities and assets.Consequently,today the company's balance sheet is one of the strongest in its industry.With this issue,the company will move forward with an enhanced capability to take advantage of market opportunities. Required: a.Prepare the journal entries to record the share issuances. b.Explain how the share issuances result in a "risk-averse strategy with respect to both liabilities and assets," and how this results in a strong balance sheet that allows the company to take advantage of market opportunities,such as profitable investments. c.Assume the board of directors declares dividends on December 31,2008 in the amount of $15,000,000.Calculate the amount of dividends to be paid to preferred shareholders and common shareholders (assume the company only has the above stated series of preferred shares outstanding).

The following is an extract from the balance sheet as at December 31,1011: at $6 per share,250,000 authorized,25,000 issued and outstanding The company did not declare dividends on preferred shares in 2011.Transactions in 2012 include the following: i.March 15: Hewitt purchased 15,000 preferred shares on the stock exchange for $5.25 per share and held these in treasury. ii.March 28: The company redeemed 5,000 preferred shares directly from shareholders. iii.July 1: The market price of common shares shot up to $5 per share,so Hewitt decided to split the common shares two to one. iv.August 1: Hewitt cancelled 14,000 preferred shares that were held in treasury. v.December 31: The company declared dividends of $0.40 per common share. Requirement: Prepare the journal entries to record the above transactions.The company uses the single-transaction method to account for treasury shares.

Which is an example of "contributed capital"?

Which statement best explains the "single transaction method" for treasury shares?

Assume that a company issued 10,000 shares for $30/share.What entry would be required to record the repurchase and cancellation of 1,000 shares at $28/share?

Which statement about shares is not correct?

Here is an extract of a trial balance for Zoe and Zia Inc.Indicate which accounts would be under the "contributed capital" section of the balance sheet.

Which statement is correct about the "single transaction method" for treasury shares?

When shares are repurchased at an amount different from their original issue price,then held in treasury or cancelled,will the journal entry affect the following components? Share capital Contributed surplus Treasury stock Loss/gain on share retirement Accumulated other comprehensive income Appropriated reserves Unappropriated retained earnings

In which account would "transactions with owners" be reported?

Which transaction would not affect retained earnings?

Dunst Company had the following shareholders' equity account balances on December 31,2011: During 2012,the following transactions occurred: i.May 1: Dunst resold 1,600 of the treasury shares at $52 per share. ii.Dec.30: The board of directors declared cash dividends of $2 per share. iii.Dec.31: Net income for the year ended December 31,2012 was $150,000. Dunst uses the single transaction method for treasury shares. Requirements: a.Record the journal entries for the transactions in 2012 and make all the necessary year-end entries relating to shareholders' equity accounts. b.Prepare the presentation of the shareholders' equity section of Dunst's balance sheet as at December 31,2012.

Which statement is correct about the "two transaction method" for treasury shares?

Explain what a "property dividend" is and why it not common.Under what circumstances would a property dividend be advisable?

Which statement best describes the accounting when a company cancels its own shares at an amount greater than their par value?

Which is an example of "contributed capital"?