Exam 3: Equities

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.

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. Required: Prepare a statement of changes in equity for the years ended December 31,2019 and 2020.

Briefly explain why equity is separated into contributed capital and accumulated income,and the latter is further separated into retained earnings and accumulated other comprehensive income (AOCI).

Explain why accounting does not recognize gains on share repurchase transactions.

Which statement about a "share buyback" is correct?

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

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.

Which statement about a "treasury shares" is correct?

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

How should subscriptions receivable be reported on the balance sheet and why?

What is the primary difference between common and preferred shares?

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

Use the following facts to determine how much each of the three classes of shares receives of the $1,000,000 cash dividend. Facts: In 2019 Blueberry Juice Inc.declared $1,000,000 in cash dividends.Its capital structure includes 300,000 common shares; 200,000 cumulative preferred shares "A" each entitled to an annual dividend of $1.00; and 50,000 non-cumulative preferred shares "B" each entitled to an annual dividend of $3.00.The prescribed dividends on both series of preferred shares were paid in 2018; there are no dividends in arrears.

If a company issues 2,000 shares for $55 and then repurchases 50 shares at $50,how much is in the account "contributed surplus on retirement of shares'?

The following is an extract from the balance sheet as at December 31,2017: The company did not declare dividends on preferred shares in 2016.Transactions in 2017 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. Required: Prepare the journal entries to record the above transactions.The company uses the single-transaction method to account for treasury shares.

Where is accumulated other comprehensive income reported and what does it represent?

Which statement about a "stock split" is correct?

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.

Which statement is correct?

Here is an extract of a trial balance for Masters Ltd.Indicate which item(s)are "assets."