Exam 13: Equities

What is the significance of "par value" for accounting purposes?

Burlington Corp.has a single class of shares.As at its year ended December 31,2012,the company had 5,000,000 shares issued and outstanding.On the stock exchange,these shares were trading at around $7.In the company's accounts,these shares had a value of $50,000,000.The equity accounts also show $650,000 of contributed surplus from previous repurchases of shares. On January 15,2013,Burlington repurchased and cancelled 250,000 shares at a cost of $7 per share.Later in the year,on August 20,the company repurchased and cancelled a further 475,000 shares at a cost of $14 per share. Requirement: Record the journal entries for the two share transactions in 2013.

Which statement does not explain the "two transaction method" for treasury shares?

What is the meaning of "shares authorized," "shares issued," and "shares outstanding"?

Below are details relating to balances for the equity accounts of Paras 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 31,2012.

Which is not a component of "equity"?

Which statement about "stock dividends" is correct?

Cardiff Corporation is a public company traded on a major exchange.Cardiff's common shares are currently trading at $21 per share.The board of directors is debating whether to issue a 200% stock dividend.The board is wondering how shareholders' equity would be affected,and whether the value of the typical shareholder's investment will change. Details of Cardiff's equity section of the balance sheet is as follows: Required: a.At what price would you expect the shares to trade after either transaction? Explain with calculations. b.Show what the equity section of the balance sheet for Cardiff would look like after the stock dividend or stock split. c.Assume that an investor has 6,000 common shares before the stock dividend or stock split.What would be the value of the investor's holdings before and after the stock dividend or stock split? d.What is your recommendation to the board of directors?

Here is an extract of a trial balance for Soorya Inc.Indicate which accounts would be reported under the "equity" section of the balance sheet of Soorya Inc.

If 10,000 shares with par value of $15/share are issued for $20/share,how much will be presented as "common shares" for financial statement purposes?

When a corporation engages in a capital transaction (those relating to its contributed capital),the journal entry may involve either a debit or a credit to contributed surplus.While not permitted by accounting standards,if these debits or credits were to be recognized through income,a debit would be called a "loss" and a credit would be called a "gain." Consider the following sequence of transactions: • Jan.1,2007: Company issues 1,500,000 no par common shares at $14 each. • Jan.1,2013: Company reacquires 150,000 common shares in the open market at $9 each,and cancels them immediately. There were no other capital transactions and the company had not paid any dividends. Required: a.Prepare the journal entries for the two transactions. b.Review the journal entry for January 1,2013.How much was credited other than cash? Does this credit reflect good or bad management? As a shareholder,would you be happy or unhappy about this credit entry? c.What would have been the journal entry for January 1,2013 had the repurchase price been $24? d.In the journal entry for part (c),explain why the debit goes to reduce retained earnings.How would a shareholder interpret the reduction in retained earnings?

Which statement about a "share buy-backs" is correct?

Which statement best describes the accounting when a company cancels its own shares at an amount lower than the average share value?

Which statement about a "stock split" is correct?

If a company issues 2,000 shares for $55 and then repurchases 50 shares at $55,how much is the contributed capital?