2015/5/21

Assignment Print View

Score: 19outof19points(100%)

1.

award:

1outof
1.00point
Thefollowingisanexcerptfromadisclosurenotefromthe2013annualreportofKaufmanChemicals,
Inc.:
COMPREHENSIVEINCOME(LOSS)
Thecomponentsofcomprehensiveincome,netoftax,areasfollows(inmillions):
YearsEndedDecember31
2013
2012
2011
Netincome
$856 $766 $594
Othercomprehensiveincome:

Changeinnetunrealizedgainsonavailableforsaleinvestments,
net

oftaxof$22,($14),and$15in2013,2012,and2011,respectively
34 (21) 23
Other
(2) (1) 1

Totalcomprehensiveincome
$888 $744 $618

Kaufman reports accumulated other comprehensive income in its statement of financial position as a
componentofshareholders'equityasfollows:

($inmillions)

2013
2012
Shareholdersequity:

Ordinarysharecapital
355 355
Sharepremium
8,567 8,567
Retainedearnings
6,544 5,988
Accumulatedothercomprehensive
107
75
income

Totalshareholdersequity
$15,573 $14,985

Required:
(4) From the information provided, determine how Kaufman calculated the $107 million accumulated
othercomprehensiveincomein2013.(Enteryouranswersinmillions.Amountstobededucted
shouldbeindicatedwithaminussign.Omitthe"$"signinyourresponse.)

($inmillions)
Accumulatedothercomprehensiveincome,2012
$75
Changeinnetunrealizedgainsoninvestments
34
Changein"other"
2

Accumulatedothercomprehensiveincome,2013
$107

Worksheet

LearningObjective:1802Describe
comprehensiveincomeandits
components.

Thefollowingisanexcerptfromadisclosurenotefromthe2013annualreportofKaufmanChemicals,
Inc.:
COMPREHENSIVEINCOME(LOSS)
Thecomponentsofcomprehensiveincome,netoftax,areasfollows(inmillions):
YearsEndedDecember31
2013
2012
2011
Netincome
$856 $766 $594
Othercomprehensiveincome:

Changeinnetunrealizedgainsonavailableforsaleinvestments,
net

oftaxof$22,($14),and$15in2013,2012,and2011,respectively
34 (21) 23
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Other

Totalcomprehensiveincome

(2)

(1)

$888 $744

$618

Kaufman reports accumulated other comprehensive income in its statement of financial position as a
componentofshareholders'equityasfollows:

($inmillions)

2013
2012
Shareholdersequity:

Ordinarysharecapital
355 355
Sharepremium
8,567 8,567
Retainedearnings
6,544 5,988
Accumulatedothercomprehensive
107
75
income

Totalshareholdersequity
$15,573 $14,985

Required:
(4) From the information provided, determine how Kaufman calculated the $107 million accumulated
othercomprehensiveincomein2013.(Enteryouranswersinmillions.Amountstobededucted
shouldbeindicatedwithaminussign.Omitthe"$"signinyourresponse.)

($inmillions)
Accumulatedothercomprehensiveincome,2012
$
75
Changeinnetunrealizedgainsoninvestments
34
Changein"other"
2

Accumulatedothercomprehensiveincome,2013
$
107

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2.

Assignment Print View

award:

1outof
1.00point
Indicatebyletterwhethereachoftheitemslistedbelowmostlikelyisreportedintheincomestatement
as Net Income (NI) or in the statement of comprehensive income as Other Comprehensive Income
(OCI).

Items

1.Increaseinthefairvalueofavailableforsalesecurities
OCI
2.Gainonsaleofland
NI
3.Lossonpensionplanassets(actualreturnlessthanexpected)
OCI
4.Gainfromforeigncurrencytranslation
OCI
5.Increaseinthefairvalueoftradingsecurities
NI
6.Lossfromrevisinganassumptionrelatedtoapensionplan
OCI
7.Lossonsaleofpatent
NI
8.Priorservicecost
OCI
9.Increaseinthefairvalueofbondsoutstandingfairvalueoption
NI
Gainonpostemploymentplanassets(actualreturnmorethan
10.
OCI
expected)

Worksheet

LearningObjective:1802Describe
comprehensiveincomeandits
components.

Indicatebyletterwhethereachoftheitemslistedbelowmostlikelyisreportedintheincomestatement
as Net Income (NI) or in the statement of comprehensive income as Other Comprehensive Income
(OCI).

Items

1.Increaseinthefairvalueofavailableforsalesecurities
OCI
2.Gainonsaleofland
NI
3.Lossonpensionplanassets(actualreturnlessthanexpected)
OCI
4.Gainfromforeigncurrencytranslation
OCI
5.Increaseinthefairvalueoftradingsecurities
NI
6.Lossfromrevisinganassumptionrelatedtoapensionplan
OCI
7.Lossonsaleofpatent
NI
8.Priorservicecost
OCI
9.Increaseinthefairvalueofbondsoutstandingfairvalueoption
NI
Gainonpostemploymentplanassets(actualreturnmorethan
10.
OCI
expected)

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3.

Assignment Print View

award:

1outof
1.00point
ThefollowingisanewsitemreportedbyReuters:

WASHINGTON,Jan29(Reuters)WrightMedicalGroup,amakerofreconstructiveimplantsforknees
andhips,onTuesdayfiledtosell3millionsharesofcommonstock.
InafilingwiththeU.S.SecuritiesandExchangeCommission,itsaiditplanstousetheproceeds
from the offering for general corporate purposes, working capital, research and development, and
acquisitions.
Afterthesaletherewillbeabout31.5millionsharesoutstandingintheArlington,Tennesseebased
company,accordingtotheSECfiling.
Wrightsharesclosedat$17.15onNasdaq.
ThecommonstockorordinaryshareofWrightMedicalGrouphasaparof$.01pershare.

Required:
Prepare the journal entry to record the sale of the shares assuming the price existing when the
announcement was made and ignoring share issue costs. (Enter your answers in dollars not in
millions.Omitthe"$"signinyourresponse.)
GeneralJournal
Debit
Credit
51,450,000
Cash

Commonstock

30,000
Paidincapitalexcessofpar
51,420,000

Worksheet

LearningObjective:1804Record
theissuanceofshareswhensoldfor
cashandfornoncashconsideration.

ThefollowingisanewsitemreportedbyReuters:
WASHINGTON,Jan29(Reuters)WrightMedicalGroup,amakerofreconstructiveimplantsforknees
andhips,onTuesdayfiledtosell3millionsharesofcommonstock.
InafilingwiththeU.S.SecuritiesandExchangeCommission,itsaiditplanstousetheproceeds
from the offering for general corporate purposes, working capital, research and development, and
acquisitions.
Afterthesaletherewillbeabout31.5millionsharesoutstandingintheArlington,Tennesseebased
company,accordingtotheSECfiling.
Wrightsharesclosedat$17.15onNasdaq.
ThecommonstockorordinaryshareofWrightMedicalGrouphasaparof$.01pershare.

Required:
Prepare the journal entry to record the sale of the shares assuming the price existing when the
announcement was made and ignoring share issue costs. (Enter your answers in dollars not in
millions.Omitthe"$"signinyourresponse.)
GeneralJournal
Debit
Credit
51,450,000
Cash

Commonstock

30,000
Paidincapitalexcessofpar

51,420,000

Explanation:

Cash=(3millionshares$17.15pershare)=51,450,000.
Commonstock=(3millionshares$.01parpershare)=30,000.

4.

award:

1outof
1.00point
Duringitsfirstyearofoperations,EasternDataLinksCorporationenteredintothefollowingtransactions
relating to shareholders equity. The articles of incorporation authorized the issue of 8 million ordinary
shares,$1parpershare,and1millionpreferenceshares,$50parpershare.

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Feb.12Sold2millionordinaryshares,for$9pershare.
13Issued40,000ordinarysharestoattorneysinexchangeforlegalservices.
13Sold80,000ofitsordinarysharesand4,000preferencesharesforatotalof$945,000.
Nov.15Issued380,000ofitsordinarysharesinexchangeforequipmentforwhichthecashpricewas
knowntobe$3,688,000.
Required:
Preparetheappropriatejournalentriestorecordeachtransaction.(Enteryouranswersindollarsnot
inmillions.Omitthe"$"signinyourresponse.)
Date
GeneralJournal
Debit
Credit
18,000,000
Feb.12 Cash

Commonstock
2,000,000

Paidincapitalexcessofpar,common
16,000,000

Feb.13 Legalexpenses

360,000

Commonstock

40,000

Paidincapitalexcessofpar,common
320,000

Feb.13 Cash

945,000

Commonstock

80,000

Paidincapitalexcessofpar,common
640,000

Preferredstock
200,000

Paidincapitalexcessofpar,preferred

25,000

Nov.15 Property,plantandequipment

3,688,000

Commonstock
380,000

Paidincapitalexcessofpar,common
3,308,000

Worksheet

LearningObjective:1804Record
theissuanceofshareswhensoldfor
cashandfornoncashconsideration.

Duringitsfirstyearofoperations,EasternDataLinksCorporationenteredintothefollowingtransactions
relating to shareholders equity. The articles of incorporation authorized the issue of 8 million ordinary
shares,$1parpershare,and1millionpreferenceshares,$50parpershare.
Feb.12Sold2millionordinaryshares,for$9pershare.
13Issued40,000ordinarysharestoattorneysinexchangeforlegalservices.
13Sold80,000ofitsordinarysharesand4,000preferencesharesforatotalof$945,000.
Nov.15Issued380,000ofitsordinarysharesinexchangeforequipmentforwhichthecashpricewas
knowntobe$3,688,000.
Required:
Preparetheappropriatejournalentriestorecordeachtransaction.(Enteryouranswersindollarsnot
inmillions.Omitthe"$"signinyourresponse.)
Date
GeneralJournal
Debit
Credit
18,000,000
Feb.12 Cash

Commonstock

2,000,000

Paidincapitalexcessofpar,common

16,000,000

Feb.13 Legalexpenses
360,000

Commonstock

40,000

Paidincapitalexcessofpar,common

320,000

Feb.13 Cash
945,000

Commonstock

80,000

Paidincapitalexcessofpar,common

640,000

Preferredstock

200,000

Paidincapitalexcessofpar,preferred

25,000

Nov.15 Property,plantandequipment
3,688,000

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Commonstock

Paidincapitalexcessofpar,common

380,000
3,308,000

Explanation:

February12:
Cash=(2millionshares$9pershare)=18,000,000.
Ordinarystock=(2millionshares$1par)=2,000,000.

February13:
Legalexpenses=(40,000shares$9pershare)=360,000.
Ordinarystock=(40,000shares$1par)=40,000.

February13:
Ordinarystock=(80,000shares$1par)=80,000.
Paidincapitalexcessofpar,ordinary*=640,000.
Preferencestock=(4,000shares$50par)=200,000.
Paidincapitalexcessofpar,Preference**=25,000.
*80,000sharesx[$9marketvalue$1par]
** Since the value of the ordinary shares is known ($720,000), the market value of the preference
($225,000)isassumedfromthetotalsellingprice($945,000).

November15:
Ordinarystock=(380,000sharesat$1parpershare)=380,000.

5.

award:

1outof
1.00point
ICOT Industries issued 15 million of its $1 par ordinary shares for $424 million on April 11. Legal,
promotional,andaccountingservicesnecessarytoeffectthesalecost$2million.
Required:
(1) Prepare the journal entry to record the issuance of the shares. (Enter your answers in millions.
Omitthe"$"signinyourresponse.)
GeneralJournal
Debit
Credit

Cash
422
Commonstock

15
Paidincapitalexcessofpar

407

(2) Explainhowrecordingtheshareissuecostsdiffersfromthewaydebtissuecostsarerecordedunder
IFRSversusU.S.GAAP.
Inrecordingthesaleofsharesabove,thecostofservicesrelatedtothesalereducedthenet
proceedsfromsellingtheshares.Sincepaidincapitalexcessofpariscreditedfortheexcessof
theproceedsovertheparamountofthesharessold,theeffectofshareissuecostsistoreducethe
amountcreditedtothataccount.Ontheotherhand,thecostsassociatedwithadebtissueare
recordedinaseparatedebtissuecostsaccountandamortizedtoexpenseoverthelifeofthedebt.
Somearguethatshareissuecostsanddebtissuecostsarefundamentallydifferent.Thisviewisthat
adebtissuehasafixedmaturityso,likeinterestexpense,debtissuecostsarepartoftheexpenseof
borrowingfundsforthatperiodoftime(recordedinaseparateexpenseaccountdebtissue
expense).Ontheotherhand,sellingsharesrepresentsaperpetualequityinterest.Justasdividends
paidonthatcapitalinvestmentarenotanexpense,neitheraretheshareissuecostsofobtainingthat
capitalinvestment.ExpensingdebtissuecostspresentlyisrequiredbyGAAP.However,theFASB
hassuggestedinConceptStatement6thatthosecostsshouldbetreatedthesamewayasshare
issuecosts,meaningthatthedebtissuecostswouldreducetherecordedamountofthedebtinstead

Worksheet

LearningObjective:1804Record
theissuanceofshareswhensoldfor
cashandfornoncashconsideration.

ICOT Industries issued 15 million of its $1 par ordinary shares for $424 million on April 11. Legal,
promotional,andaccountingservicesnecessarytoeffectthesalecost$2million.
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Required:
(1) Prepare the journal entry to record the issuance of the shares. (Enter your answers in millions.
Omitthe"$"signinyourresponse.)
GeneralJournal
Debit
Credit
Cash
422

Commonstock

15
Paidincapitalexcessofpar

407

(2) Explainhowrecordingtheshareissuecostsdiffersfromthewaydebtissuecostsarerecordedunder
IFRSversusU.S.GAAP.
Inrecordingthesaleofsharesabove,thecostofservicesrelatedtothesalereducedthenet
proceedsfromsellingtheshares.Sincesharepremiumiscreditedfortheexcessofthe
proceedsovertheparamountofthesharessold,theeffectofshareissuecostsistoreducethe
amountcreditedtothataccount.Theaccountingtreatmentforshareissuecostsissimilarunder
bothIFRSandU.S.GAAP.Ontheotherhand,underU.S.GAAP,thecostsassociatedwitha
debtissuearerecordedinaseparatedebtissuecostsaccountandamortizedtoexpenseover
thelifeofthedebt.WhereasunderIFRS,costsassociatedwithadebtissuearerecordedasa
reductionofthenetcashtheissuingcompanyreceivesfromthedebtissueandareductionof
thecarryingamountofthedebt.
Somearguethatshareissuecostsanddebtissuecostsarefundamentallydifferent.This

Explanation:

Cash=($424million$2million)=422.
Ordinarysharecapital=(15millionsharesat$1parpershare)=15.

6.

award:

1outof
1.00point
BornerCommunicationsarticlesofincorporationauthorizedtheissuanceof130millionordinaryshares.
The transactions described below effected changes in Borners outstanding shares. Prior to the
transactions,Bornersshareholdersequityincludedthefollowing:
ShareholdersEquity
($inmillions)
Ordinarysharecapital,100millionsharesat
$100
$1par
Additionalissuedcapital

300
Retainedearnings

210

Required:
Assuming that Borner Communications retires shares it reacquires (restores their status to that of
authorized but unissued shares), record the appropriate journal entry for each of the following
transactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):
1. OnJanuary7,2013,Bornerreacquired2millionsharesat$5.00pershare.
2. OnAugust23,2013,Bornerreacquired4millionsharesat$3.50pershare.
3. OnJuly25,2014,Bornersold3millionordinarysharesat$6pershare.
Date
GeneralJournal
Debit
Credit
Jan.7,2013 Ordinarysharecapital
2

Additionalissuedcapital
6

Retainedearnings
2

Cash
10

Aug.23,2013 Ordinarysharecapital
4

Additionalissuedcapital
12

Additionalissuedcapitalsharerepurchase

Cash

14

July25,2014 Cash

18

Ordinarysharecapital

Additionalissuedcapital

15

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Worksheet

LearningObjective:1805
Distinguishbetweenaccountingfor
retiredsharesandfortreasury
shares.

BornerCommunicationsarticlesofincorporationauthorizedtheissuanceof130millionordinaryshares.
The transactions described below effected changes in Borners outstanding shares. Prior to the
transactions,Bornersshareholdersequityincludedthefollowing:
ShareholdersEquity
($inmillions)
Ordinarysharecapital,100millionsharesat
$100
$1par
Additionalissuedcapital

300
Retainedearnings

210
Required:
Assuming that Borner Communications retires shares it reacquires (restores their status to that of
authorized but unissued shares), record the appropriate journal entry for each of the following
transactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):
1. OnJanuary7,2013,Bornerreacquired2millionsharesat$5.00pershare.
2. OnAugust23,2013,Bornerreacquired4millionsharesat$3.50pershare.
3. OnJuly25,2014,Bornersold3millionordinarysharesat$6pershare.
Date
GeneralJournal
Debit
Credit
Jan.7,2013 Ordinarysharecapital
2

Additionalissuedcapital
6

Retainedearnings
2

Cash

10

Aug.23,2013 Ordinarysharecapital
4

Additionalissuedcapital
12

Additionalissuedcapitalsharerepurchase

Cash

14

July25,2014 Cash
18

Ordinarysharecapital

Additionalissuedcapital

15

Explanation:

1.January7,2013:
Ordinarysharecapital=(2millionshares$1par)=2.
Additionalissuedcapital=(2millionshares$3*)=6.
Cash=(2millionshares$5pershare)=10.
*Additionalissuedcapital:$300100millionshares.

2.August23,2013:
Ordinarysharecapital=(4millionshares$1par)=4.
Additionalissuedcapital=(4millionshares$3)=12.
Cash=(4millionshares$3.50pershare)=14.

3.July25,2014:
Cash=(3millionshares$6pershare)=18.
Ordinarysharecapital=(3millionshares$1par)=3.

7.

award:

1outof
1.00point
In 2013, Borland Semiconductors entered into the transactions described below. In 2010, Borland had
issued170millionsharesofits$1parordinarysharesat$34pershare.
Required:
Assuming that Borland retires shares it reacquires, record the appropriate journal entry for each of the
followingtransactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):
1. OnJanuary2,2013,Borlandreacquired10millionsharesat$32.50pershare.
2. OnMarch3,2013,Borlandreacquired10millionsharesat$36pershare.
3. OnAugust13,2013,Borlandsold1millionsharesat$42pershare.

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4. OnDecember15,2013,Borlandsold2millionsharesat$36pershare.
Date
GeneralJournal
Jan.2,2013
Commonstock

Paidincapitalexcessofpar

Paidincapitalsharerepurchase

Cash

Mar.3,2013
Commonstock

Paidincapitalexcessofpar

Paidincapitalsharerepurchase

Retainedearnings

Cash

Aug.13,2013 Cash

Commonstock

Paidincapitalexcessofpar

Dec.15,2013 Cash

Commonstock

Paidincapitalexcessofpar

Debit
10
330

10
330
15
5

42

72

Credit

15
325

360
1
41

2
70

Worksheet

LearningObjective:1805
Distinguishbetweenaccountingfor
retiredsharesandfortreasury
shares.

In 2013, Borland Semiconductors entered into the transactions described below. In 2010, Borland had
issued170millionsharesofits$1parordinarysharesat$34pershare.
Required:
Assuming that Borland retires shares it reacquires, record the appropriate journal entry for each of the
followingtransactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):
1. OnJanuary2,2013,Borlandreacquired10millionsharesat$32.50pershare.
2. OnMarch3,2013,Borlandreacquired10millionsharesat$36pershare.
3. OnAugust13,2013,Borlandsold1millionsharesat$42pershare.
4. OnDecember15,2013,Borlandsold2millionsharesat$36pershare.
Date
GeneralJournal
Debit
Credit
Jan.2,2013
Commonstock
10

Paidincapitalexcessofpar
330

Paidincapitalsharerepurchase

15

Cash

325

Mar.3,2013
Commonstock
10

Paidincapitalexcessofpar
330

Paidincapitalsharerepurchase
15

Retainedearnings
5

Cash

360

Aug.13,2013 Cash
42

Commonstock

Paidincapitalexcessofpar

41

Dec.15,2013 Cash
72

Commonstock

Paidincapitalexcessofpar

70

Explanation:

1.January2,2013:
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Ordinaryshares=(10millionshares$1par)=10.
Paidincapitalexcessofpar=(10millionshares$33*)=330.
*$34$1par.Cash=(10millionshares$32.50)=325.

2.March3,2013:
Ordinaryshares=(10millionshares$1)=10.
Paidincapitalexcessofpar=(10millionshares$33*)=330.
Cash=(10millionshares$36)=360.
*$34$1par

3.August13,2013:
Cash=(1millionshares$42)=42.
Ordinaryshares=(1millionshares$1)=1.

4.December15,2013:
Cash=(2millionshares$36)=72.
Ordinaryshares=(2millionshares$1)=2.

8.

award:

1outof
1.00point
In 2013, Western Transport Company entered into the treasury stock transactions described below. In
2011,WesternTransporthadissued140millionsharesofits$1parordinarysharesat$17pershare.
Required:
Prepare the appropriate journal entry for each of the following transactions (Enter your answers in
millions.Roundyouranswerstothenearestdollaramounts.Omitthe"$"signinyourresponse):
1. OnJanuary23,2013,WesternTransportreacquired10millionsharesat$20pershare.
2. OnSeptember3,2013,WesternTransportsold1milliontreasurysharesat$21pershare.
3. OnNovember4,2013,WesternTransportsold1milliontreasurysharesat$18pershare.

GeneralJournal
Debit
Credit
1.

Treasurystock
200

Cash
200

2.

Cash
21

Treasurystock

20

Paidincapitalsharerepurchase

3.
Cash
18

Paidincapitalsharerepurchase
1

Retainedearnings
1

Treasurystock
20

Worksheet

LearningObjective:1805
Distinguishbetweenaccountingfor
retiredsharesandfortreasury
shares.

In 2013, Western Transport Company entered into the treasury stock transactions described below. In
2011,WesternTransporthadissued140millionsharesofits$1parordinarysharesat$17pershare.
Required:
Prepare the appropriate journal entry for each of the following transactions (Enter your answers in
millions.Roundyouranswerstothenearestdollaramounts.Omitthe"$"signinyourresponse):
1. OnJanuary23,2013,WesternTransportreacquired10millionsharesat$20pershare.
2. OnSeptember3,2013,WesternTransportsold1milliontreasurysharesat$21pershare.
3. OnNovember4,2013,WesternTransportsold1milliontreasurysharesat$18pershare.

GeneralJournal
Debit
Credit
1.
Treasurystock
200

Cash

200

2.
Cash
21

Treasurystock

20
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3.

Paidincapitalsharerepurchase

Cash
Paidincapitalsharerepurchase
Retainedearnings
Treasurystock

18
1
1

20

Explanation:

1.
Treasurystock=(10millionshares$20)=200.

2.
Cash=(1millionshares$21)=21.
Treasurystock=(1millionshares$20)=20.

3.
Cash=(1millionshares$18)=18.
Treasurystock=(1millionshares$20)=20.

9.

award:

1outof
1.00point
At December 31, 2012, the statement of financial position of Meca International included the following
shareholdersequityaccounts:
ShareholdersEquity
($inmillions)

Ordinarysharecapital,60millionsharesat
$ 60
$1par
Additionalissuedcapital
300
Retainedearnings
410

Required:
Assuming that Meca International views its share buybacks as treasury shares, record the appropriate
journalentryforeachofthefollowingtransactions(Enteryouranswersinmillions.Omitthe"$"sign
inyourresponse):
1. OnFebruary12,2013,Mecareacquired1millionordinarysharesat$13pershare.
2. OnJune9,2014,Mecareacquired2millionordinarysharesat$10pershare.
3. On May 25, 2015, Meca sold 2 million treasury shares at $15 per sharedetermine cost as the
weightedaveragecostoftreasuryshares.
4. Fortheprevioustransaction,assumeMecadeterminesthecostoftreasurysharesbytheFIFO
method.
Date
GeneralJournal
Debit
Credit
Feb.12,2013 Treasuryshares

13

Cash
13

Jun.9,2014 Treasuryshares

20

Cash
20

May25,2015 Cash

30

Additionalissuedcapitalsharerepurchase

Treasurystock

22

May25,2015 Cash

30

Additionalissuedcapitalsharerepurchase

Treasurystock

23

Worksheet

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LearningObjective:1805
Distinguishbetweenaccountingfor
retiredsharesandfortreasury
shares.

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At December 31, 2012, the statement of financial position of Meca International included the following
shareholdersequityaccounts:
ShareholdersEquity
($inmillions)

Ordinarysharecapital,60millionsharesat
$ 60
$1par
Additionalissuedcapital
300
Retainedearnings
410
Required:
Assuming that Meca International views its share buybacks as treasury shares, record the appropriate
journalentryforeachofthefollowingtransactions(Enteryouranswersinmillions.Omitthe"$"sign
inyourresponse):
1. OnFebruary12,2013,Mecareacquired1millionordinarysharesat$13pershare.
2. OnJune9,2014,Mecareacquired2millionordinarysharesat$10pershare.
3. On May 25, 2015, Meca sold 2 million treasury shares at $15 per sharedetermine cost as the
weightedaveragecostoftreasuryshares.
4. Fortheprevioustransaction,assumeMecadeterminesthecostoftreasurysharesbytheFIFO
method.
Date
GeneralJournal
Debit
Credit
Feb.12,2013 Treasuryshares
13

Cash

13

Jun.9,2014 Treasuryshares
20

Cash

20

May25,2015 Cash
30

Additionalissuedcapitalsharerepurchase

Treasurystock

22

May25,2015 Cash
30

Additionalissuedcapitalsharerepurchase

Treasurystock

23

Explanation:
1.February12,2013:

Treasuryshares=1millionshares$13=13
2.June9,2014:

Treasuryshares=2millionshares$10=20
3.May25,2015:

Cash=2millionshares$15=30
Treasuryshares=2millionshares$11*=22


*1 millionshares$13=
$13million
2 millionshares$10=
20million

3 millionshares
$33million

$33million3millionshares=$11averagecostpershare
4.May25,2015:

Cash(2millionsharesx$15)=30


*1 millionshares$13=
$13million
1 millionshares$10=
10million


$23million

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10.

Assignment Print View

award:

10outof
10.00
points
Theshareholders'equitysectionofthestatementoffinancialpositionofTNLSystemsLtdincludedthe
followingaccountsatDecember31,2012:
Shareholders'Equity
($inmillions)
Ordinarysharecapital,240millionsharesat$1par
$240
Additionalissuedcapitalexcessofpar
1,680
Additionalissuedcapitalsharerepurchase
1
Retainedearnings
1,100
Required:
(1) During 2013, TNL Systems reacquired shares of its Ordinary share capital and later sold shares in
two separate transactions. Prepare the entries for both the purchase and subsequent resale of the
sharesassumingthesharesare(a)retiredand(b)viewedastreasurystock.(Enteryouranswersin
millionsofdollars.Omitthe"$"signinyourresponse.)
a. OnFebruary5,2013,TNLSystemspurchased6millionsharesat$10pershare.

GeneralJournal
Debit
Credit
Feb.5,2013 Retirement

Commonstock
6

Paidincapitalexcessofpar
42

Paidincapitalsharerepurchase
1

Retainedearnings
11

Cash
60

TreasuryStock

Treasurystock
60

Cash
60
b. OnJuly9,2013,thecorporationsold2millionsharesat$12pershare.

GeneralJournal
July9,2013 Retirement

Cash

Commonstock

Paidincapitalexcessofpar

TreasuryStock

Cash

Treasurystock

Paidincapitalsharerepurchase

Debit

Credit

24

2
22

20
4

24

c. OnNovember14,2015,thecorporationsold2millionsharesat$7pershare.

Nov.14,2015

GeneralJournal
Retirement
Cash
Commonstock
Paidincapitalexcessofpar

TreasuryStock
Cash
Paidincapitalsharerepurchase
Retainedearnings
Treasurystock

Debit

Credit

14

2
12

20

14
5
1

(2) PreparetheshareholdersequitysectionofTNLSystemsstatementoffinancialpositionatDecember
31, 2015, comparing the two approaches. Assume all net income earned in 20132015 was
distributedtoshareholdersascashdividends.(Enteryouranswerinmillionsofdollars.Leaveno
cells blank be certain to enter "0" wherever required. Amounts to be deducted should be
indicatedwithaminussign.Omitthe"$"signsinyourresponses.)
Shareholder'sEquity
$inmillions

Treasury

Retirement
Stock

Additionalissuedcapital:

Ordinarysharecapital
$238
$240
Additionalissuedcapitalexcessofpar
1,672
1,680
Additionalissuedcapitalsharerepurchase
0
0
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2015/5/21

Assignment Print View

Retainedearnings
Less:Treasurystock

Totalshareholdersequity

$2,999

1,089

1,099
20
$2,999

LearningObjective:1805
Distinguishbetweenaccountingfor
retiredsharesandfortreasury
shares.

Worksheet

Theshareholders'equitysectionofthestatementoffinancialpositionofTNLSystemsLtdincludedthe
followingaccountsatDecember31,2012:
Shareholders'Equity
($inmillions)
Ordinarysharecapital,240millionsharesat$1par
$240
Additionalissuedcapitalexcessofpar
1,680
Additionalissuedcapitalsharerepurchase
1
Retainedearnings
1,100
Required:
(1) During 2013, TNL Systems reacquired shares of its Ordinary share capital and later sold shares in
two separate transactions. Prepare the entries for both the purchase and subsequent resale of the
sharesassumingthesharesare(a)retiredand(b)viewedastreasurystock.(Enteryouranswersin
millionsofdollars.Omitthe"$"signinyourresponse.)
a. OnFebruary5,2013,TNLSystemspurchased6millionsharesat$10pershare.

GeneralJournal
Debit
Credit
Feb.5,2013 Retirement

Commonstock
6

Paidincapitalexcessofpar
42

Paidincapitalsharerepurchase
1

Retainedearnings
11

Cash

60

TreasuryStock

Treasurystock
60

Cash

60

b. OnJuly9,2013,thecorporationsold2millionsharesat$12pershare.

GeneralJournal
July9,2013 Retirement

Cash

Commonstock

Paidincapitalexcessofpar

TreasuryStock

Cash

Treasurystock

Paidincapitalsharerepurchase

Debit

Credit

24

2
22

20
4

24

c. OnNovember14,2015,thecorporationsold2millionsharesat$7pershare.

Nov.14,2015

GeneralJournal
Retirement
Cash
Commonstock
Paidincapitalexcessofpar

TreasuryStock
Cash
Paidincapitalsharerepurchase
Retainedearnings

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Debit

Credit

14

14
5
1

2
12

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2015/5/21

Assignment Print View

Treasurystock

20

(2) PreparetheshareholdersequitysectionofTNLSystemsstatementoffinancialpositionatDecember
31, 2015, comparing the two approaches. Assume all net income earned in 20132015 was
distributedtoshareholdersascashdividends.(Enteryouranswerinmillionsofdollars.Leaveno
cells blank be certain to enter "0" wherever required. Amounts to be deducted should be
indicatedwithaminussign.Omitthe"$"signsinyourresponses.)
Shareholder'sEquity
$inmillions

Treasury

Retirement
Stock

Additionalissuedcapital:

Ordinarysharecapital
$
238
$
240
Additionalissuedcapitalexcessofpar
1,672
1,680
Additionalissuedcapitalsharerepurchase
0
0
Retainedearnings
1,089
1,099
Less:Treasurystock

20

Totalshareholdersequity
$
2,999
$
2,999

Explanation:

(1)
Retirement
a.February5,2013
Ordinarysharecapital(6millionsh.$1)=6
Additionalissuedcapitalexcessofpar(6millionshares$7*)=42
Additionalissuedcapitalexcessofpar:$1,680240

TreasuryStock
Treasurystock(6millionsh.$10)=60

b.July9,2013
Retirement
Cash(2millionsh.$12)=24
Ordinarysharecapital(2millionsh.$1)=2

TreasuryStock
Cash(2millionsh.$12)=24
Treasurystock(2millionsh.$10)=20

c.November14,2015
Retirement
Cash(2millionsh.$7)=14
Ordinarysharecapital(2millionsh.$1)=2

TreasuryStock
Cash(2millionsh.$7)=14
Additionalissuedcapital.sh.repurchase($1+4)=5
Treasurystock(2millionsh.$10)=20

(2)
Additionalissuedcapitalexcessofpar=1,672
*1,68042+22+12

Retainedearnings=1,089**
**1,10011

Retainedearnings=1,099***
***1,1001

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