15-2 Flashcards
Subscriptions were received for 10,000 shares at $46 per share. Cash of $92,000 was
received in full payment for 2,000 shares and share certificates were issued. The remaining
subscription for 8,000 shares was to be paid in full by September 30, 2014, and the
certificates would then be issued on that date.
dr. Cash …………………………………………………………… 92,000
dr. Share Subscriptions Receivable…………………… 368,000
* *cr. Common Shares Subscribed…………………. 368,000**
cr. Common Shares …………………………………… 92,000
The company purchased 2,000 of its own common shares on the open market at $39 per
share. These shares were restored to the status of authorized but unissued shares.
Common Shares…………………………………………….. 65,660
Retained Earnings………………………………………….. 12,340
Cash (2,000 X $39) …………………………………… 78,000
Retained Earnings is also debited for $12,340, since there is no contributed surplus, the difference between the repurchase price of $39 per share less the average stated price of $32.83 per share (from the schedule of walking forward balances)
The company declared a 5% stock dividend for shareholders of record on January 15, 2014,
to be issued on January 31, 2014. The company was having a liquidity problem and could not
afford a cash dividend at the time. The company’s common shares were selling at $52 per
share on December 15, 2013.
Retained Earnings………………………………………….. 336,000
Common Stock Dividends Distributable……. 286,000
Dividends Payable ………………………………….. 50,000
Common Stock Dividends Distributable = 286,000 => 5% of 110,000 (# of shares at that date) x $52 (the FV at the time). KEEP A SCHEDULE WITH THE # OF SHARES AND WALK FORWARD THE BALANCE
Dividends Payable ………………………………….. 50,000 => at the same date the company declared $1 dividend/per prefered share
In March 2013, the company received a term loan from Alberta Bank. The bank requires the company to establish
a sinking fund and restrict retained earnings for an amount equal to the sinking fund deposit. The annual sinking fund payment of$50,000 is due on April30 each year; the first payment was made on schedule on April 30, 2014.
- *April 30, 2014**
dr. Investment in Sinking Fund…………………………….. 50,000
cr. Cash……………………………………………………….. 50,000
S/E ->What is it in Share Capital?
- Start with preferred shares
- dividend?
- cumulative? non-particpating?
- how many authorized?
- how many outstanding/issued?
- balance? (how many were sold and for how much?)
S/E -> Share Capital - common shares
- how many authorized?
- how many outstanding/issued?
- balance? (how many were sold and for how much?) ->have a schedule and record every transaction
Have a total share capital balance! (preferred + common)
Dont forget COMMON SHARES SUBSCRIBED - Add it up to the TOTAL SHARE CAPITAL
(it will be subtracted from R/E)
Shareholder Equity - Retained Earnings
- Appropiated balance (for sinking funds) - you can just have a note disclosure only
- Unappropiated balance (or the part that belongs to Retained Earnings):
Retained Earnings B/B
+ Net Income - Net loss
Deduct:
- appropiation for sinking fund
- excess of cost of reacquired shares over assigned value
- preferred dividend
- stock dividend, common shares
3. Less: Share Subbscription receivable (can also be shown in Current assets) - because you added them in the Share Capital Section
_ _
TOTAL SHAREHOLDER EQUITY
Schedule for Common Shares
Common share transactions:
Date Shares Price Common shares
** ** #shares FV at the $ balance
issued time they were
issued
Have dates for each journal entry so it will be easier to track
Special situation in common shares transactions:
- If shares were issued for Assets, record the # of shares issued and the FV of the asset
- when encounter Share subsciption receivable - record only the Shares for which Cash was already received
- when you repurchase shares use the avearge book value of the shares. The difference is going in Retained Earnings or Contributed Surplus
