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Chapter 15: Question 6IFRS (page 825)

Indicate how each of the following accounts should be classified in the Equity section.

  1. Share Capital—Ordinary.
  2. (b) Retained Earnings.
  3. Share Premium—Ordinary.
  4. Treasury Shares.
  5. Share Premium—Treasury
  6. Share Capital—Preference
  7. Accumulated Other Comprehensive Income.

Short Answer

Expert verified

Each of the accounts will mention in the equity section with a different classification.

Step by step solution

01

Meaning of Equity

Equity, commonly referred to as shareholders' value (or owners' value for privately held companies), represents the amount of money that would be returned to the company's shareholders if all resources were sold, and in case of liquidation, all the debts of the company were paid.

02

Classification of different accounts in the Equity section

The Classification is made as given below:

Accounts

Classification

  1. Share Capital-Ordinary

Share capital

  1. Retained earnings

Retained earnings

  1. Share Premium-Ordinary

Share premium

  1. Treasury Shares

Deducted from total equity

  1. Share Premium- Treasury

Share Premium

  1. Share Capital-Preference

Share capital

  1. Accumulated Other

Comprehensive Income

Added to total Equity

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Most popular questions from this chapter

Explain how underwriting costs and accounting and legal fees associated with the issuance of stock should be recorded.

Dagwood Inc. recently noted that its 4% preferred stock and 4% participating preferred stock, which are both cumulative, have priority as to dividends up to 4% of their par value. Its participating preferred stock participates equally with the common stock in any dividends in excess of 4%. What is meant by the term participating? Cumulative?

Ravonette Corporation issued 300 shares of \(10 par value common stock and 100 shares of \)50 par value preferred stock for a lump sum of \(13,500. The common stock has a market price of \)20 per share, and the preferred stock has a market price of $90 per share. Prepare the journal entry to record the issuance.

List possible sources of additional paid-in capital.

The following note related to stockholders’ equity was reported in Wiebold, Inc.’s annual report.

On February 1, the Board of Directors declared a 3-for-2 stock split, distributed on February 22 to shareholders of record on February 10. Accordingly, all numbers of common shares, except unissued shares and treasury shares, and all per share data have been restated to reflect this stock split.

On the basis of amounts declared and paid, the annualized quarterly dividends per share were \(0.80 in the current year and \)0.75 in the prior year.

Instructions

  1. What is the significance of the date of record and the date of distribution?
  2. Why might Wiebold have declared a 3-for-2 for a stock split?
  3. What impact does Wiebold’s stock split have on (1) total stockholders’ equity, (2) total par value, (3) outstanding shares, and (4) book value per share?
See all solutions

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