15-1

Question 1

Repurchased for cash and cancelled 500 shares of the outstanding common shares issued in item 2 above at S49 per share.

In Item 2 shares were issued for Land

Answer 1

Because we have a fair value for the asset, we can work back the value allocated per share.

dr. Common Shares - the actual value that goes out of that account
cr. Cash- always the amount received

dr. Retained Earnings for the difference

Question 2

Issuing and buying back shares (common or preferred)

Answer 2

On the S/E statement i say how many are authorized an how many are issued. I just do the math: # issued - # boought back = balance on the S/E statement

Question 3

Assuming that the company has retained earnings from operations of $1,032,000, prepare the shareholders’ equity section of its statement of financial position after considering all the transactions above

Answer 3

So they tell me the amount from operations, I just need to calculated the changes (in this case there was a debit from a C/S buy back) so the final result goes on the S/E statement

Question 4

Buying the shares back for more than the book value

Answer 4

If the reacquisition cost of the shares is greater
than the original cost, the acquisition cost is allocated
to share capital, then contributed surplus, and
then retained earnings.

Common Shares …………………………………. 10,500
Retained Earnings ………………………………. 14,000
Cash……………………………………………. 24,500

Question 5

Buying the shares back cheaper than BV

Answer 5

If the cost is less, the cost is
allocated to share capital (to stated or assigned cost)
and to contributed surplus.

de. Preferred Shares ($110 X 3,000 shares) … 330,000
cr. Cash……………………………………………. 300,000
* *cr. Contributed Surplus …………………….. 30,000**

Question 6

Buying back shares at a price lower than the COST

Answer 6

When Treasury Stock is re-issued < Cost
Then charge difference to
1. Any Contributed capital Account arising from prior
resale or cancellation of shares
2. To retained Earnings for remainder of deficiency.