Exam 13: Equities

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

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

BA Paint Ltd.was incorporated on January 1,2019.The incorporation documents authorized an unlimited number of common shares and 200,000 preferred shares.During the following fiscal year,the company engaged in the following transactions relating to its equity: On January 1,the company issued 20,000 no par value common shares at $10 per share.On the same day,it issued 5,000 preferred shares for proceeds of $120 per share.These preferred shares have a par value of $100 per share and cumulative dividends of 6% per year. On March 20,the company issued an additional 20,000 common shares at $20 per share. On April 30,BA Paint Ltd.repurchased and cancelled 2,000 common shares at a cost of $12 per share. On September 1,the company issued stock options to its executives.These stock options entitle the executives to purchase up to 10,000 common shares at a price of $25 per share over the next five years.The board of directors intended the options to compensate for management's services for the eight months from January 1 to August 31,2019.Compensation consultants have estimated the value of these options to be $20,000. On September 2,the company repurchased and cancelled 2,000 shares at $22 per share. For the fiscal year ended December 31,2019,the company had net income of $130,000 and zero other comprehensive income.The board of directors declared the 6% dividends payable to preferred shareholders and $20,000 of dividends for the common shareholders.
To analyze these transactions,it is often useful to use a spreadsheet.Similar to inventory accounting,it is necessary to keep track of both the dollar amounts and the number of units (shares).In addition,it is necessary to separate the equity components among common and preferred shares,any contributed surplus for each class of shares,as well as retained earnings. Required: 1.Provide the journal entries for each of these transactions. 2.Prepare a statement of changes in equity.Note: AOCI from revaluations during 2019 was $250.

What are three potential outcomes for defaults on share subscriptions?

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 "common shares" is correct?

Use the facts from #13,above,to determine how much each of the three classes of shares receives of the $1,000,000 cash dividend if dividends were last declared in 2017.

Which statement is correct about "par value"?

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

If 700 preferred shares with a par value of $35/share,a dividend rate of 5% and redeemable for $50/share,are sold for $45/share how much dividend may the preferred equity holders expect to receive?

Supply Company Ltd.issues a $60 million bond due in 10 years,and the bond indenture specifies that the company must set aside $6 million per year in a sinking fund so that the company will have funds to repay the bondholders at the end of 10 years.Assuming that the company complies with the contractual requirements,what would the journal entry be for each of the next 10 years?

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?

Great-West Lifeco Inc.announced the following share issuances: March 1,2013 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 9,2013 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 31,2013 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).

What is the primary difference between common and preferred shares?

What is a "stock split"?

Which statement is correct respecting a company's repurchase of its own shares?

Who uses information about "equity" and what information about equity is useful to financial statement users?

Key Corp has a October 31 year end.On October 2,2017,the board of directors declared a cash dividend of $1.50 per common share,payable on November 24,2017.The date of record for this dividend is November 17,and the ex-dividend date is November 15,2017.Additional information relating to the shares follows: Required: a.Determine the dollar amount of dividends to be paid as a result of the dividend declaration on October 2,2017. b.Record all the journal entries related to this dividend in 2017.

What is the "ex-dividend" date for the Toronto Stock Exchange?

Milton Corporation declared and distributed a 8% stock dividend.Milton had 440,000 common shares outstanding and 940,000 common shares authorized before the stock dividend.The board of directors determined the appropriate market value per share as $10. Required: How much should be recorded for the stock dividend? Record the journal entry (if any)for the shares distributed.