Ch15

Topics: Dividend, Stock, Dividends Pages: 13 (1566 words) Published: April 5, 2015
CHAPTER 15

Equity

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 15-1

Cash4,500
Share Capital—Ordinary (300 X €10)3,000
Share Premium—Ordinary1,500

BRIEF EXERCISE 15-2

(a)Cash8,200
Share Capital—Ordinary8,200

(b)Cash8,200
Share Capital—Ordinary (600 X €2)1,200
Share Premium—Ordinary7,000

BRIEF EXERCISE 15-4

Cash13,500
Share Capital—Preference (100 X $50)5,000
Share Premium—Preference3,100
Share Capital—Ordinary (300 X $10)3,000
Share Premium—Ordinary2,400

FV of ordinary (300 X $20)$ 6,000
FV of preference (100 X $90) 9,000
Total FV$15,000

Allocated to ordinary  X $13,500 = $ 5,400

Allocated to preference X $13,500 = 8,100

BRIEF EXERCISE 15-5

Land31,000
Share Capital—Ordinary (3,000 X £5)15,000
Share Premium—Ordinary16,000

BRIEF EXERCISE 15-7

7/1/10Treasury Shares (100 X €87)8,700
Cash8,700

9/1/10Cash (60 X €90)5,400
Treasury Shares (60 X €87)5,220
Share Premium—Treasury 180

11/1/10Cash (40 X €83)3,320
Share Premium—Treasury160
Treasury Shares (40 X €87) 3,480

BRIEF EXERCISE 15-8

8/1/10Treasury Shares (200 X $80)16,000
Cash16,000

11/1/10Cash (200 X $70)14,000
Retained Earnings 2,000
Treasury Shares16,000

BRIEF EXERCISE 15-9

Cash61,500
Share Capital—Preference (500 X €100)50,000
Share Premium—Preference11,500

BRIEF EXERCISE 15-10

Aug. 1
Retained Earnings (2,000,000 X $1)
2,000,000

Dividends Payable

2,000,000

Aug. 15
No entry.

Sep. 9
Dividends Payable
2,000,000

Cash

2,000,000

BRIEF EXERCISE 15-13

Declaration Date.

Retained Earnings
1,300,000

Ordinary Share Dividend Distributable

200,000
Share Premium—Ordinary

1,100,000
(20,000* X $65 = $1,300,000;
( 20,000 X $10 = $200,000)

*400,000 shares X 5%

Distribution Date.

Ordinary Share Dividend Distributable
200,000

Share Capital—Ordinary

200,000

SOLUTIONS TO EXERCISES

EXERCISE 15-1 (15–20 minutes)

(a)Jan.10Cash (80,000 X €6)480,000
Share Capital—Ordinary
   (80,000 X €3)240,000
Share Premium—Ordinary240,000

Mar.1Organization Expense35,000
Share Capital—Ordinary
   (5,000 X €3)15,000
Share Premium—Ordinary20,000

July1Cash (30,000 X €8)240,000
Share Capital—Ordinary
   (30,000 X €3)90,000
Share Premium—Ordinary
(30,000 X €5)150,000

Sept.1Cash (60,000 X €10)600,000
Share Capital—Ordinary
   (60,000 X €3)180,000
Share Premium—Ordinary
(60,000 X €7)420,000

(b)If the shares have a stated value of €2 per share, the entries in (a) would be the same except for the euro amounts. For example, the Jan. 10 entry would include credits of €160,000 to Share Capital—Ordinary and €320,000 to Share Premium—Ordinary. EXERCISE 15-2 (15–20 minutes)

Jan.10Cash (80,000 X $5)400,000
Share Capital—Ordinary
   (80,000 X $2)160,000
Share Premium—Ordinary
   (80,000 X $3)240,000

Mar.1Cash (5,000 X $108)540,000
Share Capital—Preference
   (5,000 X $50)250,000
Share Premium—Preference
   (5,000 X $58)290,000

April1Land80,000
Share Capital—Ordinary
   (24,000 X $2)48,000
Share Premium—Ordinary
   ($80,000 – $48,000)32,000

May1Cash (80,000 X $7)560,000
Share Capital—Ordinary
   (80,000 X $2)160,000
Share Premium—Ordinary
   (80,000 X $5)400,000

Aug.1Organization Expense 50,000
Share Capital—Ordinary
   (10,000 X $2)20,000
Share Premium—Ordinary
   ($50,000 – $20,000)30,000

Sept.1Cash (10,000 X $9)90,000
Share Capital—Ordinary
   (10,000 X $2)20,000
Share Premium—Ordinary
   (10,000 X $7)70,000

Nov.1Cash (1,000 X $112)112,000...
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