AFM391 Chapter Notes - Chapter 13: Treasury Stock, Issued Shares, Retained Earnings

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lemonbeetle804

16 Dec 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM391

Professor

Sasan Saiy

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Document Summary

Priority: the rank of a liability or an equity claim when a company liquidates, where higher priority confers preferential payout before other claimants. Contributed capital: the component of equity that reflects amounts received by the reporting entity from transactions with its owners, net of any repayments from capital. Common (ordinary) shares: an equity interest that has the lowest priority and represents the residual ownership interest in the company . Preferred shares: any shares that are not common shares. Preferred shares have priority over common shares with respect to the receipt of dividends and a claim on the entity"s net assets in liquidation. Par value shares: shares with a dollar value stated in the articles of incorporatio n; for preferred shares, the dividend rate may be stated as a percentage of par value. Contributed surplus: the component of contributed capital other than par value.

Related Questions

At the end of 2017, Jeffco Inc. had the following equity accounts and balances:

Common shares, no par (175,000 shares issued and outstanding)	$1,926,400
Retained earnings	310,000

During 2018, Jeffco engaged in the following transactions involving its equity accounts:

Issued 8,000 common shares for $35 per share.

Issued 1,000 shares of 9%, $120 stated value preferred shares at $125 per share.

Declared and paid cash dividends of $15,000.

Repurchased and cancelled 500 common shares for $52 per share.

Required:

1. Prepare the journal entries for a through d. For a compound transaction, for those boxes in which no entry is required, leave the box blank.

a. 2018	Cash
	Common Shares
	(Record issue of common shares)
b.	Cash
	Preferred Shares
	Contributed Surplus-Preferred Shares
	(Record issue of preferred shares)
c.	Retained Earnings (or Dividends)
	Cash
	(Record declaration and payment of dividends)
d.	Retained Earnings
	Common Shares
	Cash
	(Record repurchase of common shares)

2. Assume that 2018 net income was $89,600. Prepare a partial statement of financial position showing only the shareholders' equity section at December 31, 2018.

Jeffco, Inc.
Statement of Financial Position (Partial)
December 31, 2018
Shareholders' equity:
Preferred shares, 9%, $120 stated value	$
Common shares, no par
Contributed surplus:
Preferred shares
Total capital stock
Retained earnings
Total shareholders' equity	$

cerisesnake518

At the end of 2017, Jeffco Inc. had the following equity accounts and balances:

Common shares, no par (175,000 shares issued and outstanding)	$1,926,400
Retained earnings	310,000

During 2018, Jeffco engaged in the following transactions involving its equity accounts:

Issued 8,000 common shares for $35 per share.

Issued 1,000 shares of 9%, $120 stated value preferred shares at $125 per share.

Declared and paid cash dividends of $15,000.

Repurchased and cancelled 500 common shares for $52 per share.

Required:

1. Prepare the journal entries for a through d. For a compound transaction, for those boxes in which no entry is required, leave the box blank.

a. 2018	Cash
	Common Shares
	(Record issue of common shares)
b.	Cash
	Preferred Shares
	Contributed Surplus-Preferred Shares
	(Record issue of preferred shares)
c.	Retained Earnings (or Dividends)
	Cash
	(Record declaration and payment of dividends)
d.	Retained Earnings
	Common Shares
	Cash
	(Record repurchase of common shares)

2. Assume that 2018 net income was $89,600. Prepare a partial statement of financial position showing only the shareholders' equity section at December 31, 2018.

Jeffco, Inc.
Statement of Financial Position (Partial)
December 31, 2018
Shareholders' equity:
Preferred shares, 9%, $120 stated value	$
Common shares, no par
Contributed surplus:
Preferred shares
Total capital stock
Retained earnings
Total shareholders' equity	$

taupewildebeest962

ACT5725

The stockholders' equity of Verrecchia Company at December 31, 2016, follows:

Common stock, $5 par value, 500,000 shares authorized; 350,000 shares issued and outstanding	$1,750,000
Paid-in capital in excess of par value	800,000
Retained earnings	634,000

During 2017, the following transactions occurred:
Jan. 5 Issued 10,000 shares of common stock for $13 cash per share.
Jan. 18 Repurchased 4,000 shares of common stock at $16 cash per share.
Mar. 12 Sold one-fourth of the treasury shares acquired January 18 for $19 cash per share.
July 17 Sold 500 shares of treasury stock for $14 cash per share.
Oct. 1 Issued 5,000 shares of 8%, $25 par value preferred stock for $36 cash per share. This is the first issuance of preferred shares from the 50,000 authorized preferred shares.

(a) Use the financial statement effects template to indicate the effects of each transaction.

Use negative signs with answers, when appropriate.

	Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contributed Capital	+	Earned Capital
Jan. 5	Answer		Answer		Answer		Answer		Answer
Jan. 18	Answer		Answer		Answer		Answer		Answer
Mar. 12	Answer		Answer		Answer		Answer		Answer
July. 17	Answer		Answer		Answer		Answer		Answer
Oct. 1	Answer		Answer		Answer		Answer		Answer

Income Statement
Revenue	-	Expenses	=	Net Income
Answer		Answer		Answer
Answer		Answer		Answer
Answer		Answer		Answer
Answer		Answer		Answer
Answer		Answer		Answer

(b) Prepare the December 31, 2017, stockholders' equity section of the balance sheet assuming that the company reports net income of $76,900 for the year.

Use a negative sign with your answer for treasury stock.

Stockholders' Equity
Paid-in capital
8% Preferred stock, $25 par value, 50,000 shares authorized, 5,000 shares issued and outstanding	$Answer
Common stock, $5 par value, 500,000 shares authorized; 360,000 shares issued	Answer	$Answer
Additional Paid-in capital
Paid-in capital in excess of par value-preferred stock	Answer
Paid-in capital in excess of par value-common stock	Answer
Paid-in capital from treasury stock	Answer	Answer
Total paid-in capital		Answer
Retained earnings		Answer
		Answer
Less: Treasury stock (2,500 shares) at cost (use a negative sign with answer)		Answer
Total Stockholders' Equity		$Answer

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AFM391 Chapter Notes - Chapter 13: Treasury Stock, Issued Shares, Retained Earnings

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