Escolar Documentos
Profissional Documentos
Cultura Documentos
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.
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.
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 $15 per sharedetermine cost as the
weightedaveragecostoftreasuryshares.
4. Fortheprevioustransaction,assumeMecadeterminesthecostoftreasurysharesbytheFIFO
method.
Date
GeneralJournal
Debit
Credit
Feb.12,2013 Treasuryshares
13
Cash
13
Jun.9,2014 Treasuryshares
20
Cash
20
May25,2015 Cash
30
Additionalissuedcapitalsharerepurchase
Treasurystock
22
May25,2015 Cash
30
Additionalissuedcapitalsharerepurchase
Treasurystock
23
Worksheet
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LearningObjective:1805
Distinguishbetweenaccountingfor
retiredsharesandfortreasury
shares.
11/15
2015/5/21
At December 31, 2012, the statement of financial position of Meca International included the following
shareholdersequityaccounts:
ShareholdersEquity
($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
$23million
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10.
award:
10outof
10.00
points
Theshareholders'equitysectionofthestatementoffinancialpositionofTNLSystemsLtdincludedthe
followingaccountsatDecember31,2012:
Shareholders'Equity
($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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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$7pershare.
Nov.14,2015
GeneralJournal
Retirement
Cash
Commonstock
Paidincapitalexcessofpar
TreasuryStock
Cash
Paidincapitalsharerepurchase
Retainedearnings
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Debit
Credit
14
14
5
1
2
12
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Treasurystock
20
(2) PreparetheshareholdersequitysectionofTNLSystemsstatementoffinancialpositionatDecember
31, 2015, comparing the two approaches. Assume all net income earned in 20132015 was
distributedtoshareholdersascashdividends.(Enteryouranswerinmillionsofdollars.Leaveno
cells blank be certain to enter "0" wherever required. Amounts to be deducted should be
indicatedwithaminussign.Omitthe"$"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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