Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Textbook Question
Chapter 15, Problem 10C
For numerous reasons, a corporation may reacquire shares of its own capital stock. When a corporation purchases treasury stock, it has two options as to how to account for the shares: (1) the cost method and (2) the par value method.
Required:
Write a short report that compares and contrasts the cost method with the par value method for each of the following:
- 1. Purchase of shares at a price less than par value.
- 2. Purchase of shares at a price greater than par value.
- 3. Subsequent resale of treasury shares at a price less than purchase price, but more than par value.
- 4. Subsequent resale of treasury shares at a price greater than both purchase price and par value.
- 5. Effect on net income.
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The excess of issue price over par of common stock is termed a(n)
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O b.
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1. The issuer of an ordinary share dividend to ordinary shareholders should transfer from retained earnings to contributed capital an amount equal to the
a. fair value of the shares issued.
b. par or stated value of the shares issued.
c. book value of the shares issued.
d. minimum legal requirements.
2. Statement 1: Treasury shares are a company’s own shares that have been reacquired and retired.
Statement 2: The cost method records all transactions in treasury shares at their cost and reports the treasury shares as a deduction from ordinary shares.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect.
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a. increases ordinary shares outstanding and increases total equity.
b. increases retained earnings and increases total equity.
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True or False.
1.
The fixed assets are recorded in the corporation books at their gross book
values.
2.
3.
4.
5.
6.
7.
8.
9.
10.
The accounts receivable is recorded at net amount together with the
allowance for doubtful accounts.
The amount per share which a corporation agrees to pay, if it elects to
redeem the stock, is called redemption price.
If a corporation issues only one class of stock, this is the Preferred Stock.
A corporation issuing preferred stock may at times reserve the right to
redeem it later under specified conditions. Such stock is known as callable
or redeemable preferred stock.
There is always the possibility that a subscriber will pay part of the
subscription price, and fails to pay the balance on the call date specified.
In this case, the stockholder is considered to have defaulted, and the
unpaid amount is called delinquent subscription.
A subscriber is considered a stockholder and he possess all the rights of a
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Chapter 15 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 15 - Prob. 1GICh. 15 - Prob. 2GICh. 15 - What are the three components and the basic...Ch. 15 - List the various rights of a shareholder. Which do...Ch. 15 - What is the meaning of the following terms: (a)...Ch. 15 - Prob. 6GICh. 15 - Prob. 7GICh. 15 - How does preferred stock differ from common stock?Ch. 15 - What amount of the proceeds from the issuance of...Ch. 15 - Prob. 10GI
Ch. 15 - Prob. 11GICh. 15 - Prob. 12GICh. 15 - Prob. 13GICh. 15 - Prob. 14GICh. 15 - Prob. 15GICh. 15 - Prob. 16GICh. 15 - Prob. 17GICh. 15 - Prob. 18GICh. 15 - Prob. 19GICh. 15 - How is a preferred stock similar to a long-term...Ch. 15 - Prob. 21GICh. 15 - Prob. 22GICh. 15 - Prob. 23GICh. 15 - Prob. 24GICh. 15 - Prob. 25GICh. 15 - What additional disclosures about preferred and...Ch. 15 - Prob. 1MCCh. 15 - Cary Corporation has 50,000 shares of 10 par...Ch. 15 - What is the most likely effect of a stock split on...Ch. 15 - Prob. 4MCCh. 15 - Prob. 5MCCh. 15 - Prob. 6MCCh. 15 - Prob. 7MCCh. 15 - When treasury stock is purchased for cash at more...Ch. 15 - Preferred stock that may be retired by the...Ch. 15 - When treasury stock accounted for by the cost...Ch. 15 - Brown Corporation issues 800 shares of its 5 par...Ch. 15 - Heart Corporation entered into a subscription...Ch. 15 - Blue Corporation issues 200 packages of securities...Ch. 15 - Sun Corporation issues 500 shares of 8 par common...Ch. 15 - Next Level Morgan Corporation issues 500 packages...Ch. 15 - Prob. 6RECh. 15 - On January 1, 2019, Phoenix Corporation adopts a...Ch. 15 - On January 2, 2019, Brust Corporation grants its...Ch. 15 - Prob. 9RECh. 15 - Assume Cole Corporation originally issued 300...Ch. 15 - Violet Corporation issues 1,200 shares of 150 par...Ch. 15 - Assume that Lily Corporation has outstanding 1,500...Ch. 15 - Tulip Corporation uses the cost method to account...Ch. 15 - Par Value and No-Par Stock Issuance Caswell...Ch. 15 - Combined Sale of Stock Maxville Company issues 300...Ch. 15 - Sale of Stock with Bonds Pilsen Company issues 12%...Ch. 15 - Issuance of Stock for Land Putt Company issues 500...Ch. 15 - Prob. 5ECh. 15 - Prob. 6ECh. 15 - Prob. 7ECh. 15 - Prob. 8ECh. 15 - Restricted Share Units On January 2, 2019, Dekker...Ch. 15 - Prob. 10ECh. 15 - Convertible Preferred Stock On January 2, 2019,...Ch. 15 - Prob. 12ECh. 15 - Stock Rights with Preferred Stock Nelson...Ch. 15 - Various Journal Entries Lodi Company is authorized...Ch. 15 - Treasury Stock, Cost Method On January 1, Lorain...Ch. 15 - Contributed Capital Adams Companys records provide...Ch. 15 - Prob. 17ECh. 15 - Treasury Stock, Cost and Par Value Methods On...Ch. 15 - Treasury Stock, No Par Propst-Steele Production...Ch. 15 - Subscriptions On August 3, 2019, the date of...Ch. 15 - Prob. 2PCh. 15 - Prob. 3PCh. 15 - Prob. 4PCh. 15 - Prob. 5PCh. 15 - Prob. 6PCh. 15 - Issuances of Stock Cada Corporation is authorized...Ch. 15 - Issuances of Stock Epple Corporation is authorized...Ch. 15 - Comprehensive Young Corporation has been operating...Ch. 15 - Comprehensive The shareholders equity section of...Ch. 15 - Treasury Stock Analysis Ray Holt Corporation has...Ch. 15 - Comprehensive Byrd Companys Contributed Capital...Ch. 15 - Prob. 13PCh. 15 - Prob. 14PCh. 15 - Reconstruct Journal Entries At the end of its...Ch. 15 - Treasury Stock, Cost Method Bush-Caine Company...Ch. 15 - Prob. 17PCh. 15 - Prob. 1CCh. 15 - Prob. 2CCh. 15 - Prob. 3CCh. 15 - Capital Stock Capital stock is an important area...Ch. 15 - Treasury Stock A corporation sometimes engages in...Ch. 15 - Prob. 6CCh. 15 - Prob. 7CCh. 15 - Compensatory Share Option Plan Tom Twitlet,...Ch. 15 - Prob. 9CCh. 15 - Treasury Stock For numerous reasons, a corporation...Ch. 15 - Prob. 11CCh. 15 - Prob. 12CCh. 15 - Prob. 13CCh. 15 - Prob. 14C
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- In some circumstances, corporations will buy back their own stock – called Treasury Stock. Identify three reasons why a company may choose to do so.arrow_forwardIn applying the treasury shares (i.e., cash in/cash out) method to determine the dilutive effect of shares, options and warrants, the proceeds assumed to be received upon exercise of the options and warrants Select one: a. are used to calculate the number of common shares repurchased at the average market price, when calculating diluted earnings per share. b. are added, net of tax, to the numerator of the calculation for diluted earnings per share. c. are disregarded in the calculation of earnings per share if the exercise price of the options and warrants is less than the ending market price of common shares. d. are deducted from the income available to common share holders. e. None of the above.arrow_forwardTreasury shares are an entity’s own shares that were previously issued but are subsequently reacquired but not retired. Treasury shares are favorably accounted for: at fair value any of the other choices at cost at par valuearrow_forward
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