E15-1 (Recording the Issuances of Ordinary Shares) during its first year of operations, Sitwell Corporation had the following transactions pertaining to its ordinary shares.
1. (a) Prepare the journal entries for these transactions, assuming that the ordinary shares have a par value of €3 per share.
2. (b) Briefly discuss how the entries in part (a) will change if the shares are nopar with a stated value of €2 per share. E15-2 (Recording the Issuance of Ordinary and Preference Shares) Abernathy Corporation was organized on January 1, 2015. It is authorized to issue 10,000 shares of 8%, $50 par value preference shares, and 500,000 shares of no-par ordinary shares with a stated value of $2 per share. The following share transactions were completed during the first year.
Prepare the journal entries to record the above transactions. E15-3 (Shares Issued for Land) Twenty-five thousand shares reacquired by Pierce Corporation for £48 per share were exchanged for undeveloped land that has an appraised value of £1,700,000. At the time of the exchange, the ordinary shares were trading at £60 per share on an organized exchange.
1. (a) Prepare the journal entry to record the acquisition of land, assuming that the purchase of the shares was originally recorded using the cost method. 2. (b) Briefly identify the possible alternatives (including those that are totally unacceptable) for quantifying the cost of the land and briefly support your choice.
E15-4 (Lump-Sum Sale of Shares with Bonds) Hewa Corporation is a regional company, whose securities are thinly traded. Hewa has issued 10,000 units. Each unit consists of a CHF500 par, 12% subordinated debenture and 10 shares of CHF5 par ordinary shares. The investment banker has retained 400 units as the underwriting fee. The other 9,600 units were sold to outside investors for cash at CHF850 per unit. Prior to this sale, the 2-week ask price of ordinary shares was CHF40 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.
1. (a) Prepare the journal entry to record Hewa's transaction, under the following conditions. (Round to the nearest CHF.)
(1) Employing the incremental method.
(2) Employing the proportional method, assuming the recent price quote on the ordinary shares reflects fair value.
2. (b) Briefly explain which method is, in your opinion, the better method. E15-5 (Lump-Sum Sales of Ordinary and Preference Shares) Hewa Inc. issues 500 shares of €10 par value ordinary shares and 100 shares of €100 par value preference shares for a lump sum of €100,000.
1. (a) Prepare the journal entry for the issuance when the fair value of the ordinary shares is €168 each and fair value of the preference shares is €210 each. (Round to the nearest euro.)
2. (b) Prepare the journal entry for the issuance when only the fair value of the ordinary shares (€170 per share) is known.
E15-6 (Share Issuances and Repurchase) Loxley Corporation is authorized to issue 50,000 shares of $10 par value ordinary shares. During 2015, Loxley took part in the following selected transactions.
1. 1. Issued 5,000 shares at $45 per share, less costs related to the issuance of the shares totaling $7,000.
2. 2. Issued 1,000 shares for land appraised at $50,000. The shares were actively traded on a national securities exchange at approximately $46 per share on the date of issuance.
3. 3. Purchased 500 treasury shares at $44 per share. The treasury shares purchased were issued in 2014 at $40 per share.
1. (a) Prepare the journal entry to record item 1.
2. (b) Prepare the journal entry to record item 2.
3. (c) Prepare the journal entry to record item 3 using the cost method. E15-7 (Effect of Treasury Share Transactions on Financials) Goosen Company has outstanding 40,000 shares of €5 par ordinary shares which had been...
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