Chapter 15: Question 1IFRS (page 825)
Where can authoritative IFRS guidance related to stockholders’ equity be found?
Authoritative IFRS guidance are IAS 1, IAS 32, and IAS 39
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Stock splits and stock dividends may be used by a corporation to change the number of shares of its stock outstanding.
Distinguish among: cash dividends, property dividends, liquidating dividends, and stock dividends.
(Equity Items on the Balance Sheet) The following are selected transactions that may affect stockholders’ equity.
Instructions
In the following table, indicate the effect each of the nine transactions has on the financial statement elements listed. Use the following code: I = Increase, D = Decrease, NE = No effect.
Item | Asset | Liabilities | Stockholders’ Equity | Paid-in Capital | Retained Earnings | Net Income |
Washington Company has the following stockholders’ equity accounts at December 31, 2017.
Common Stock (\(100 par value, authorized 8,000 shares) \)480,000
Retained Earnings 294,000
Instructions
a. Prepare entries in journal form to record the following transactions, which took place during 2018.
1. 280 shares of outstanding stock were purchased at \(97 per share. (These are to be accounted for using the cost method.)
2. A \)20 per share cash dividend was declared.
3. The dividend declared in (2) above was paid.
4. The treasury shares purchased in (1) above were resold at \(102 per share.
5. 500 shares of outstanding stock were purchased at \)105 per share.
6. 350 of the shares purchased in (5) above were resold at \(96 per share.
b.Prepare the stockholders’ equity section of Washington Company’s balance sheet after giving effect to these transactions, assuming that the net income for 2018 was \)94,000. State law requires restriction of retained earnings for the amount of treasury stock.
The following comment appeared in the notes of Colorado Corporation’s annual report: “Such distributions, representing proceeds from the sale of Sarazan, Inc., were paid in the form of partial liquidating dividends and were in lieu of a portion of the Company’s ordinary cash dividends.” How would a partial liquidating dividend be accounted for in the financial records?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
