CHAPTER15

EQUI
TY
TRUE-
FALSE—Concept
ual
Answer No. Descr
ipt
ion
T 1. Stateacor por ati
oni ncorpor atesin.
F 2. Definitionofpr eempt i
ver i
ght .
T 3. Ordinar yshar esasr esidualinterest.
F 4. Earnedcapi tal def initi
on.
T 5. Repor tingt rueno- parshar es.
F 6. All
ocat ingpr oceedsi nlumpsum sal es.
T 7. Account ingf orshar esi ssuedf ornoncashconsider
ati
on.
F 8. Definitionoft reasur yshares.
F 9. Repor tingt reasur yshar esundercostmet hod.
T 10. Sell
ingt reasur yshar esbel owcost .
F 11. Participat i
ngpr ef er enceshar es.
T 12. Callablepr eferenceshar es.
T 13. Rest ri
ct i
ngl egal capi t
al.
F 14. Disclosi ngdi videndpol i
cy.
F 15. Affectofdi videndsont otalequi ty.
T 16. Proper tydi videndsdef ini
tion.
T 17. Account ingf orsmal lsharedi vidend.
F 18. Shar espl itsandl ar geshar edi vidends.
F 19. Comput i
ngr at eofr eturnonor dinaryshareequi
ty.
T 20. Comput i
ngpay outr atio.

MULTI
PLECHOI
CE—Concept
ual
Answer No. Descr
ipt
ion
c 21. Nat ureofshar ehol ders'i
nterest .
b 22. Pre-empt iveri
ght .
a 23. Pre-empt iveri
ght .
S
b 24. Speci al character i
sti
csofcor poratefor
m.
b 25. Def i
ni t
ionofor dinaryshar es.
c 26. Ident i
ficationofequi tycategor i
es.
S
c 27. Def i
ni t
ionofr esi dual owner.
c 28. Nat ureofshar ehol ders'equit
y .
d 29. Sour cesofshar eholders'equity.
d 30. Classi ficati
onofshar eholders' equi
ty.
d 31. Allocat ionmet hodsf oralumpsum i ssuance.
b 32. Ordi naryshar esi ssuedi npay mentofser vi
ces.
a 33. Cost sofi ssui
ngor dinaryshar es.
b 34. Creat ionof" secr etreserves."
P
a 35. Aut hor i
zedshar es.
S
d 36. Parv alueshar es.
S
b 37. Legal restri
cti
onsf orprofitdistri
buti
ons.
b 38. Ordi naryNo- parshar es.
15-2 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

a 39. Account
ingfori
ssuecost
s.
S
a 40. Acqui
sit
ionoftr
easur
yshares.
MULTI
PLECHOI
CE—Concept
ual(
cont
.)
Answer No. Descr
ipt
ion
P
d 41. Treasur yshar esdef inition.
c 42. Purchaseoft reasur yshar esatgr eatert hanparv alue.
a 43. Saleoft reasur yshar es.
a 44. Reissuedt reasur yshar esatl esst hanacqui sit
ioncost.
b 45. Reissuedt reasur yshar esatgr eatert hanacqui si
tioncost
.
c 46. Effectoft r
easur yshar est ransact ions.
c 47. Prefer enceshar es—debtf eatur es.
b 48. Cumul at ivefeat ureofpr eferenceshar es.
P
b 49. Repor ti
ngr edeemabl eshar es.
S
c 50. Repor ti
ngdi videndsi nar rear s.
a 51. Feat uresofpr ef erenceshar es.
b 52. Prefer enceshar espar ti
ci pat i
ngf eat ure.
c 53. Liquidat i
ngdi vidends.
c 54. Issuedv s.out st andingor dinar yshar es.
b 55. Timi ngofent ryt orecor ddi v
idends.
c 56. Shar esent itl
edt or ecei veacashdi vi
dend.
c 57. Account i
ngf orapr oper tydi vidend.
a 58. Distribut ionofapr oper tydi vi
dend.
a 59. Liquidat i
ngdi vidend.
b 60. Entryt or ecor dal i
qui dat ingdi v i
dend.
b 61. Effect sofashar ediv idend.
b 62. Effect sofashar ediv idend.
b 63. Effectofal ar geshar edi vidend.
b 64. Largeshar edi vidend.
a 65. Smal lshar edi vidend.
a 66. Smal lshar edi vidend.
b 67. Classi ficationofshar edi videndsdi stri
but able.
b 68. Effectofshar espl i
tsandshar edi vidends.
c 69. Effectofashar espl it.
b 70. Disclosur esi nt hest atementoff inanci alposi t
ion.
a 71. Retur nonor dinar yshar eequi tycalcul ati
on.
b 72. Pay outr atiocal cul ation.
c 73. Bookv aluepershar e.
P
a 74. Comput ingbookv aluepershar e.
b 75. IFRSr equi redf i
nanci al st atement s.
b 76. Tradi ngont heequi t
ydef i
ni t
ion.
c *77. Dividendsandt reasur yshar es.
a *78. Noncumul ativepr eferenceshar esanddi videndsinar r
ear
s.
a *79. Disclosur eofpr eferencedi videndsi nar rears.
P
Thesequest
ionsalsoappeari
ntheProbl
em-Solvi
ngSur
viv
alGui
de.
S
Thesequest
ionsalsoappeari
ntheStudyGuide.
*
Thistopi
cisdealtwit
hinanAppendixtothechapter
.
Equi
ty 15-3
15-4 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

MULTI
PLECHOI
CE—Comput
ati
onal
Answer No. Descr
ipt
ion
a 80. Composi ti
onofequi t
y .
b 81. Calculati
onoft ot al cont r
ibut edcapi tal
.
b 82. All
ocat i
ngpr oceedsi nl umpsum sal es.
c 83. All
ocat i
ngpr oceedsi nl umpsum sal es.
d 84. Comput i
ngt ot al cont r
ibut edcapi tal .
b 85. All
ocat i
ngpr oceedsi nl umpsum sal es.
c 86. All
ocat i
ngpr oceedsi nl umpsum sal es.
d 87. All
ocat i
ngpr oceedsi nl umpsum sal es.
c 88. All
ocat i
ngpr oceedsi nl umpsum sal es.
d 89. Recordingi ssuanceofst at edv alueshar es.
b 90. Reissuet reasur yshar esabov ecost .
d 91. Comput i
ngshar epr emi um—t reasur yamount .
d 92. Recordingpur chaseoft r
easur yshar es.
b 93. Reissuet reasur yshar es—abov eacqui siti
oncost .
c 94. Reissuet reasur yshar es—costmet hod.
c 95. Comput i
ngshar epr emi um wi tht reasur yshar etransactions.
d 96. Calculati
onoft ot al shar epr emi um amount .
c 97. Calculati
onoft ot al shar epr emi um amount .
a 98. Totalequi tywi t
ht reasur yshar et ransact i
ons.
c 99. Totalequi tywi t
ht reasur yshar eexchange.
c 100. Calculatedi videndsf orcumul at i
v epr eferenceshar es.
a 101. Calculatedi videndsf oror di naryshar es.
a 102. Calculatedi videndsf oror di naryshar es.
c 103. Recordingi ssuanceofconv ertiblepr eferenceshar es.
b 104. Recordingconv er sionofconv er t
ibl epr eferenceshar es.
c 105. Reduct i
oni nr et ainedear ningsf rom pr opertydi vi
dends.
d 106. Reduct i
oni nr et ainedear ningsf rom pr opertydi vi
dends.
b 107. Reduct i
oni nr et ainedear ningscausedbyapr opertydividend.
d 108. Reduct i
oni nr et ainedear ningsf rom pr opertydi vi
dends.
d 109. Reduct i
oni nr et ainedear ningsf rom pr opertydi vi
dends.
a 110. Decreasei nr et ainedear ningsf rom cashandshar edividends.
c 111. Calculati
onofal ar geshar edi v i
dend.
a 112. Calculati
onofasmal lshar edi vidend.
b 113. Calculati
onofasmal lshar edi vidend.
b 114. Smal lsharedi vidend' sef fectonr etainedear nings.
b 115. Balanceofr etai nedear ningsaf terasmal l
shar edividend.
a 116. Calculater etainedear ningsav ailabl efordi vi
dends.
a 117. Calculatedecr easei nretai nedear nings.
d 118. Calculater etainedear ningsav ailabl efordi vi
dends.
d 119. Calculatedecr easei nretai nedear nings.
b 120. Recordingsmal l shar ediv idend.
d 121. Account ingf orshar espl it.
a 122. Comput ebookv aluepershar e.
b 123. Comput erateofr et urnonor dinar yshar eequi ty.
a 124. Comput epay outr atio.
c 125. Calculatet hepay outr at i
o.
a 126. Calculatebookv aluepershar e.
 Equi
ty 15-5

c 127. Cal
cul
ater
ateofr
etur
nonor
dinar
yshar
eequi
ty.
MULTI
PLECHOI
CE—Comput
ati
onal(
cont
.)
Answer No. Descr
ipt
ion
c 128. Calcul
ateprice-earningsr ati
o.
a 129. Calcul
atedividendspai dtoordinaryshar ehol
der s.
b 130. Rateofreturnonor dinaryshareequi ty.
c 131. Determinether ateofr et
urnonor dinaryshar eequi t
y.
a 132. Determinebookv aluepershar e.
b 133. Comput ati
onofpay outr ati
o.
b 134. Comput ati
onofbookv al
uepershar e.
b *
135. All
ocati
onofcashdi videndtoor di
nar yandpr ef erenceshares.
d *
136. Cashdiv i
dendsf orcumul ati
veprefer enceshar es.
b *
137. Cashdiv i
dendsf orcumul ati
veparticipatingpref erenceshares.
c *
138. Cashdiv i
dendal l
ocat ionwithpar t
icipatingprefer enceshares.
b *
139. Cashdiv i
dendf orcumul ati
vepreferenceshar es.

MULTI
PLECHOI
CE—CPAAdapt
ed
Answer No. Descr
ipt
ion
d 140. Ordinarysharesissuedi npay mentofser vices.
b 141. Proceedsf r
om pr eferenceshar esinlumpsum i ssue.
c 142. Determinesharepr emi um—t reasurybalance.
b 143. Reissuetreasuryshar es—costmet hod.
c 144. Effectofthereissuanceoft reasuryshares.
d 145. Entrytorecordpr opertydi vi
dendsdecl ared.
b 146. Effectofaliqui
dat i
ngdi v
idend.
d 147. Effectofasharedi vidend.
d 148. Sharedividendwhenmar ketpriceexceedsparv alue.
a 149. Balanceofr et
ainedear ningsfollowingshar edi
v i
dend.
c *
150. All
ocationofcashdi videndt oor di
naryandpr eferenceshar
es.

EXERCI
SES
I
tem Descr
ipt
ion
E15-
151Lumpsum i ssuanceofshares.
E15-
152Treasur
yshar es.
E15-
153Treasur
yshar es.
E15-
154Treasur
yshar es.
E15-
155Treasur
yshar es.
E15-
156Equit
ytransactions.
E15-
157Sharedivi
dends.
E15-
158Sharedivi
dendsandshar espl i
ts.
E15-
159Comput at
ionofsel ect
edrati
os.
*
E15-
160Divi
dendsonpr ef er
enceshares.
*
E15-
161Divi
dendsonpr ef er
enceshares.
15-6 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

PROBLEMS
I
tem Descr
ipt
ion
P15-
162Equit
ytransacti
ons.
P15-
163Treasur
yshar etr
ansact
ions.
P15-
164Sharedivi
dends.
P15-
165Equit
ytransacti
ons.
*
P15-
166Divi
dendsonpr efer
enceandordi
nar
yshar
es.

CHAPTERLEARNI
NGOBJECTI
VES
1. Di
scusst
hechar
act
eri
sti
csoft
hecor
por
atef
orm ofor
gani
zat
ion.

2. I
dent
if
ythekeycomponent
sofequi
ty.

3. Expl
aint
heaccount
ingpr
ocedur
esf
ori
ssui
ngshar
es.

4. Descr
ibet
heaccount
ingf
ort
reasur
yshar
es.

5. Expl
aint
heaccount
ingf
orandr
epor
ti
ngofpr
efer
enceshar
es.

6. Descr
ibet
hepol
i
ciesusedi
ndi
str
ibut
ingdi
vi
dends.

7. I
dent
if
ythev
ari
ousf
ormsofdi
vi
denddi
str
ibut
ions.

8. Expl
aint
heaccount
ingf
orsmal
landl
argeshar
edi
vi
dends,
andf
orshar
espl
i
ts.

9. I
ndi
cat
ehowt
opr
esentandanal
yzeequi
ty.

*
10. Expl
ainthedi
ff
erentt
ypesofpr
efer
enceshar
edi
vi
dendsandt
hei
ref
fectonbookv
alue
pershar
e.
 Equi
ty 15-7

SUMMARYOFLEARNI
NGOBJECTI
VESBYQUESTI
ONS

I
tem Typ I
tem Typ I
tem Typ I
tem Typ I
tem Typ I
tem Typ I
tem Typ
e e e e e e e
Lear
ningObj
ect
ive1
1. TF 3. TF 22. MC S
24. MC
2. TF 21. MC 23. MC 25. MC
Lear
ningObj
ect
ive2
4. TF 26. MC S
27. MC 28. MC 29. MC 30. MC
Lear
ningObj
ect
ive3
5. TF 32. MC S
36. MC 80. MC 84. MC 88. MC 151. E
6. TF 33. MC S
37. MC 81. MC 85. MC 89. MC 162. P
7. TF 34. MC 38. MC 82. MC 86. MC 120. MC
31. MC P
35. MC 39. MC 83. MC 87. MC 141. MC
Lear
ningObj
ect
ive4
8. TF P
41. MC 45. MC 92. MC 96. MC 142. MC 153. E
9. TF 42. MC 46. MC 93. MC 97. MC 143. MC 154. E
10. TF 43. MC 90. MC 94. MC 98. MC 144. MC 155. E
S
40. MC 44. MC 91. MC 95. MC 99. MC 152. E 163. P
Lear
ningObj
ect
ive5
11. TF 47. MC P
49. MC 51. MC 100. MC 102. MC 104. MC
12. TF 48. MC S
50. MC 52. MC 101. MC 103. MC
Lear
ningObj
ect
ive6
13. TF 14. TF
LearningObject
ive7
15. TF 55. MC 59. MC 105. MC 109. MC 164. P
16. TF 56. MC 60. MC 106. MC 145. MC 165. P
53. MC 57. MC 61. MC 107. MC 146. MC
54. MC 58. MC 62. MC 108. MC 156. E
LearningObject
ive8
17. TF 65. MC 69. MC 113. MC 117. MC 121. MC 157. E
18. TF 66. MC 110. MC 114. MC 118. MC 147. MC 158. E
63. MC 67. MC 111. MC 115. MC 119. MC 148. MC 164. P
64. MC 68. MC 112. MC 116. MC 120. MC 149. MC 165. P
LearningObject
ive9
19. TF 72. MC 76. MC 125. MC 129. MC 133. MC
20. TF 73. MC 122. MC 126. MC 130. MC 134. MC
70. MC P
74. MC 123. MC 127. MC 131. MC 159. E
71. MC 75. MC 124. MC 128. MC 132. MC
LearningObjecti
ve*10
77. MC 79. MC 136. MC 138. MC 150. MC 161. E
78. MC 135. MC 137. MC 139. MC 160. E 166. P
Not
e: TF=Tr
ue-
Fal
se
15-8 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

MC=Mul tipl
eChoi
ce
E=Exercise
P=Problem
 Equi
ty 15-9

TRUE-
FALSE—Concept
ual
1. Acorpor
ati
onisincor
por
atedi
nonl
yonecount
ryr
egar
dlessoft
henumberofcount
ri
esi
n
whi
chitoper
ates.

2. Thepr
eempt
iver
ightal
l
owsshar
ehol
der
sther
ightt
ovot
efordi
rect
orsoft
hecompany
.

3. Or
dinar
yshar
esi
sther
esi
dual
cor
por
atei
nter
estt
hatbear
stheul
ti
mat
eri
sksofl
oss.

4. Ear
nedcapi
tal
consi
stsofcont
ri
but
edcapi
tal
andr
etai
nedear
nings.

5. Tr
ueno-
parsharesshoul
dbecar
ri
edi
ntheaccount
sati
ssuepr
icewi
thoutanyshar
e
pr
emi
um repor
ted.

6. Companiesall
ocat
etheproceedsr
ecei
vedf
rom al
ump-
sum sal
eofsecur
it
iesbasedon
thesecur
it
ies’
parval
ues.

7. Compani
esshouldr
ecordsharesi
ssuedforservi
cesornoncashpropert
yatei
thert
hef
air
val
ueoft
hesharesi
ssuedorthefai
rval
ueoft heconsi
der
ati
onreceived.

8. Tr
easur
yshar
esar
eacompany
’sownshar
est
hathav
ebeenr
eacqui
redandr
eti
red.

9. Thecostmethodr
ecor
dsallt
ransacti
onsintr
easuryshar
esatt
hei
rcostandr
epor
tst
he
tr
easur
yshar
esasadeduct
ionfrom or
dinar
yshares.

10. Whenacorporat
ionsel
lst
reasur
ysharesbel
ow i
tscost,i
tusual
l
ydebi
tst
hedi
ff
erence
bet
weencostandsel
li
ngpr
icetoShar
ePremium—Treasury
.

11. Part
ici
pat
ingpref
erencesharesrequi
rethati
facompanyf ai
l
st opayadivi
dendi
nany
year
,itmustmakeitupinalatery
earbef
orepayi
nganyor
dinarydi
vi
dends.

12. Cal
lablepref
erencesharespermi
tthecor
por
ati
onati
tsopt
iont
oredeem t
heout
standi
ng
pr
eferencesharesatsti
pulat
edpr
ices.

13. Thel
awsofsomej ur
isdict
ionsrequi
ret
hatcor
por
ati
onsr
est
ri
ctt
hei
rcont
ri
but
edcapi
tal
fr
om di
str
ibut
iont
oshar eholder
s.

14. Manycompani
espaydi
vi
dendsi
n amount
sequalt
othei
rlegal
l
yav
ail
abl
eret
ained
ear
nings.

15. Alldiv
idends,exceptf
orl
i
qui
dat
ingdi
vi
dends,r
educet
het
otalshar
ehol
der
s’equi
tyofa
corporat
ion.

16. Di
videndspay
ablei n asset
soft
hecor
por
ati
on ot
hert
han cash ar
ecal
l
ed pr
oper
ty
di
vi
dendsordi
videndsinkind.

17. Whenasharedividendislessthan20-25per
centoftheordinar
ysharesoutst
andi
ng,a
companyi
srequi
redt ot
ransfert
hefai
rval
ueoftheshar
esissuedfrom r
etai
nedear
nings.

18. Shar
espl
i
tsandl
argeshar
edi
vi
dendshav
ethesameef
fectonacompany
’sr
etai
ned
15-10 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

earningsandtotalshar
ehol
ders’
equi
ty.
19. Ther ateofreturnonor di
nar
yshareequi
tyi
scomput
edbydi
vi
dingneti
ncomebyt
he
averageordi
naryequity
.

20. Thepayoutr
atioisdet
erminedbydiv
idi
ngcashdi
vi
dendspai
dtoor
dinar
yshar
ehol
der
sby
neti
ncomeav ai
labl
etoordinar
yshar
eholder
s.

Tr
ue-
Fal
seAnswer
s—Concept
ual
I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans.
1. T 6. F 11. F 16. T
2. F 7. T 12. T 17. T
3. T 8. F 13. T 18. F
4. F 9. F 14. F 19. F
5. T 10. T 15. F 20. T

MULTI
PLECHOI
CE—Concept
ual
21. Theresi
dual i
nter
estinacorpor
ati
onbel
ongst
othe
a.management .
b.creditor
s.
c. ordi
narysharehol
ders.
d.pr ef
erencesharehol
ders.

22. Thepre-
empt i
veri
ghtofanor di
naryshareholderistherightt
o
a.shareproporti
onatel
yincorporateasset
suponl i
quidati
on.
b.shareproporti
onatel
yinanynewi ssuesofst ockoft hesameclass.
c. r
eceivecashdivi
dendsbeforetheyaredistri
butedtopr ef
erenceshar
ehol
der
s.
d.excludeprefer
enceshareholdersfr
om votingright
s.

23. Thepr e-
empt i
veri
ghtenablesashar
eholdert o
a.shar eproporti
onatel
yinanynewissuesofsharesofthesamecl ass.
b.r eceiv
ecashdi vi
dendsbefor
eotherclassesofstockwit
houtthepre-empti
veright
.
c. sellordi
narysharesbacktot
hecorporationatt
heoptionofthesharehol
der.
d.r eceiv
et hesameamountofdi vi
dendsonaper cent
agebasi sast hepr efer
ence
shareholder
s.
S
24. Speci
alcharact
eri
sti
csofthecorpor
ateformthataff
ectaccount
ingi
ncl
udet
he
a.infl
uenceofcorporat
elaw.
b.useoft hesharesyst
em.
c. devel
opmentofav ar
iet
yofowner shi
pint
erest
s.
d.Al l
oftheabovearecorrect
.
 Equi
ty 15-11

25. Hir
oCor p.issuesshareswhi
chbeartheult
imaterisksofl
ossandrecei
vethebenefi
tof
success.Theseshar esar
enotguar
anteeddiv
idendsnorasset
supondissol
uti
on.These
sharesareconsidered
Or
dinary Prefer
ence
a. Yes Yes
b. Yes No
c. No Yes
d. No No

26. Cat
egori
esofequit
yi ncl
udeal
lofthefol
lowi
ngexcept
a.Non-contr
oll
i
ngi nter
est
.
b.Accumulatedothercomprehensi
veincome.
c. Li
qui
dati
ngdivi
dends.
d.Treasur
yshares.
S
27. Sharehol
dersofabusi nessent erpri
searesai dtobet her esi
dualowner s.Theter
m
resi
dualownermeanst hatshar ehol
ders
a.ar eenti
tl
edtoadividendev eryyearinwhichthebusinessearnsapr of
it
.
b.hav etheri
ghtstospeci f
icassetsofthebusiness.
c. bearthe ult
imater isks and uncertai
nti
es and r
eceiv ethe benefi
ts ofenter
pri
se
ownershi
p.
d.cannegot i
ateindi
vi
dual cont r
actsonbehalfoftheenterpri
se.

28. Tot
alsharehol
ders'
equi
tyrepresents
a.aclaimt ospeci
fi
cassetscont ri
butedbytheowners.
b.themaxi mum amountthatcanbebor r
owedbyt heenter
pri
se.
c. acl
aim agai
nstaport
ionoft hetotalasset
sofanenterpri
se.
d.onlytheamountofearningst hathavebeenret
ainedinthebusi
ness.

29. Aprimarysour ceofsharehol

ders'equit
yis
a.incomer etainedbythecorporation.
b.appr opri
at edretai
nedearnings.
c. contri
butionsbyshar ehol
ders.
d.bot hincomer et
ainedbythecor porat
ionandcont
ri
but
ionsbyhol
der
s.

30. Equi
tyisgener all
yclassi
fi
edint
ot womaj orcategor
ies:
a.cont ri
butedcapitalandappropri
atedcapital
.
b.appr opri
atedcapi t
alandret
ainedearnings.
c. r
etainedear ni
ngsandunearnedcapi t
al.
d.earnedcapi t
alandcontri
butedcapit
al.

31. Theaccounti
ngproblem i nalumpsum i
ssuanceistheall
ocat
ionofpr
oceedsbet
ween
thecl
assesofsecurit
ies.Anaccept
abl
emethodofall
ocat
ionist
he
a.prof or
mamet hod.
b.proporti
onalmethod.
c. i
ncremental
met hod.
d.eithert
heproporti
onal met
hodorthei
ncr
ementalmethod.
15-12 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

32. When a corporat

ion i
ssues i t
s ordinary shares in pay
mentf orservi he l
ces,t east
appr
opri
atebasisforr
ecordingthetransacti
oni sthe
a.fairv
alueoftheservi
cesr ecei
ved.
b.parvalueofthesharesissued.
c. f
airv
alueofthesharesissued.
d.Anyoft heseprovi
desanappr opri
at ebasisforrecor
dingthet
ransact
ion.

33. Di
rectcost
sincur
redt
osel
lshar
essuchasunder
wri
ti
ngcost
sshoul
dbeaccount
edf
oras
1.areduct
ionofshar
epremi
um.
2.anexpenseoftheper
iodi
nwhi
cht
heshar
esar
eissued.
3.anint
angibl
easset
.
a.1
b.2
c. 3
d.1or3

34. A"secretreserve"willbecr eatedi f

a.inadequat edepr eciat
ioni schar gedt
oincome.
b.acapi talexpendi t
ureischar gedtoexpense.
c. l
iabil
it
iesareunder stated.
d.shar eholder
s' equit
yisov erstat
ed.
P
35. Whichofthef ol
lowingrepr
esent
sthet
otal
numberofshar
est
hatacor
por
ati
onmayi
ssue
undert
het ermsofitschart
er?
a.authorizedshares
b.issuedshar es
c. uni
ssuedshar es
d.outstandingshar es
S
36. Sharesthathaveafixedper-
shar
eamountpr
int
edoneachshar
ecer
ti
fi
cat
ear
ecal
l
ed
a.st at
edv al
ueshares.
b.f i
xedv al
ueshares.
c. unif
ormv al
ueshar es.
d.parv alueshar
es.
S
37. Which oft hef ol
l
owing i snota legalrestr
ict
ion relat
ed to profi
tdistri
butionsbya
cor
por ation?
a.Theamountdi str
ibutedtoownersmustbei ncompl iancewi t
ht helawsgov erni
ng
corpor ati
ons.
b.Theamountdi stri
butedinanyoney earcannev erexceedt henetincomer eportedf
or
thaty ear.
c. Profitdistr
ibut
ionsmustbef ormall
yapprovedbyt heboar dofdir
ectors.
d.Di videndsmustbei nf ul
lagr
eementwi t
ht hecapitalcontract
sast opreferencesand
participat
ion.

38. Ordi
naryno-parshar
es
a.Ar econsider
edil
legal
.
b.Ar esubjectt
ohightaxes.
c. Arealwayssoldatapremium.
d.All oft
hechoicesarecorr
ect.
 Equi
ty 15-13

39. DunnTr adingCo.issued2,500ordinar yshares,Theshar

eshavea₤2parval
ueandsold
for₤12pershar e.Dunni ncur
red₤3, 000t oselltheshar
esrel
atedt
ounder
writ
ingcost
s
andlegalfees.DunnTr adi
ngCo.ei l
lrecordthe₤3,000as
a.Adebi ttoShar
ePr emium—Or dinary.
b.Adebi ttoFi
nancingExpense.
c. Acredi tt
oSharePr emium—Or dinary.
d.Acr edi tt
oShareCapi t
al—Ordi
nar y.
S
40. InJanuary2012,FinleyCor por ati
on,anewl yfor
medcompany ,issued10,
000shar
esofi t
s
$10paror di
naryshar esf or$15pershar e.OnJuly1,2012,Fi
nleyCorpor
ati
onreacquir
ed
1,000sharesofit
sout standingshar esfor$12pershare.Theacquisi
ti
onoft
hesetreasur
y
shares
a.decr easedtotalshar eholders'equity
.
b.i ncr
easedtotalshar eholders'equity.
c. didnotchanget otal shareholders'equi
ty.
d.decr easedthenumberofi ssuedshar es.
P
41. Tr
easuryshar
esare
a.shareshel
dasani nvest
mentbythetr
easureroft
hecor
por
ati
on.
b.shareshel
dasani nvest
mentofthecor
porati
on.
c. i
ssuedandoutst
andingshar
es.
d.issuedbutnotout
standi
ngshar
es.

42. Whent r
easurysharesarepurchasedf ormor ethant heparv alueofthesharesandthe
costmethodisusedtoaccountf ortr
easuryshares,whataccount (
s)shoul
dbedebited?
a.Treasurysharesfortheparv alueandshar epremium fortheexcessofthepurchase
pr
iceovertheparval
ue.
b.hav epremium f
orthepurchasepr i
ce.
c. Tr
easurysharesfort
hepur chaseprice.
d.Treasurysharesfort
heparv alueandr et
ainedearningsfortheexcessofthepur
chase
pr
iceovertheparval
ue.

43. “Gai
ns"onsalesoftreasury(usi
ngt
hecostmet
hod)shoul
dbecr
edi
tedt
o
a.sharepr emium—treasury
.
b.sharecapital.
c. r
etai
nedear ni
ngs.
d.otherincome.

44. PorterCorp.pur chasedi tsownparv al

ueshar esonJanuar y1,2010f or$20,000and
debitedthet r
easurysharesaccountf orthepurchasepr i
ce.Theshareswer esubsequentl
y
soldf or$12,000.The$8, 000di ff
erencebet weent hecostandsal espr i
ceshouldbe
recordedasadeduct i
onf r
om
a.shar epr emium—t reasuryt otheext entthatpr ev i
ousnet" gai
ns"from salesoft he
samecl assofst ockar eincl
udedt herei
n;other
wi se,fr
om retai
nedearnings.
b.shar epr emium—t reasurywithoutregardast owhet herornottherehavebeenpr ev
ious
net"gains"from salesoft hesamecl assofsharesi ncludedther
ein.
c. retai
nedear nings.
d.neti ncome.
15-14 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on
 Equi
ty 15-15

45. Howshoulda" gai

n"fr
om t hesaleoftreasurysharesberefl
ect
edwhenusi
ngt
hecost
methodofrecordi
ngtreasurysharestransacti
ons?
a.Asot heri
ncomeshownont heincomest atement.
b.Asshar epremium fr
om t r
easurysharetransacti
ons.
c. Asanincreaseint
heamountshownf orsharecapital
.
d.Asani ncreaseint
her etai
nedearningsamount .

46. Whichofthefol
lowi
ngbestdescri
besapossi
bleresul
toft
reasur
yshar
etr
ansact
ionsbya
cor
porat
ion?
a.Mayi ncr
easebutnotdecr
easeretai
nedear
nings.
b.Mayi ncr
easenetincomeift
hecostmethodisused.
c. Maydecreasebutnoti
ncr
easeretai
nedear
nings.
d.Maydecr easebutnoti
ncr
easenetincome.

47. Whichofthef ol
lowi
ngfeatur
esofpr
efer
enceshar
esmakest
hesecur
it
ymor
eli
kedebt
thananequit
yinstr
ument?
a.Par t
ici
pat
ing
b.Vot i
ng
c. Redeemable
d.Noncumul ati
ve

48. Thecumul ati

vefeatur eofpreferenceshar es
a.limi t
st heamountofcumul ativedividendstotheparv alueofthepr eferenceshares.
b.r equiresthatdiv idendsnotpai di nanyy earmustbemadeupi nal ateryearbefore
divi
dendsar edi stri
butedtoor dinaryshareholders.
c. meanst hattheshar ehol
dercanaccumul ateprefer
enceshar esunt i
litisequalt othe
parv alueofordinar ysharesatwhi cht i
mei tcanbeconv er
tedint
oor dinaryshares.
d.enabl esapr eferenceshar eholdert oaccumul atedivi
dendsunt i
lt heyequalt hepar
valueoft heshar esandr eceivet hesharesinplaceoft hecashdividends.
P
49. Accordi
ngtoIFRS,redeemablepreferenceshar esshouldbe
a.includedwithordi
naryshares.
b.includedasaliabil
i
ty.
c. excl
udedfrom thestatementoffinancialposit
ion.
d.includedasacont r
ai t
em i
nshar eholders'equi
ty.
S
50. Cumulativepref
er encedi vi
dendsi nar
rearsshouldbeshowni
nacorpor
ati
on'
sst
atement
off
inancialposi
tionas
a.ani ncreaseincur r
entl i
abil
i
ties.
b.ani ncreaseinequi ty.
c. afootnote.
d.ani ncreaseincur rentli
abil
iti
esforthecurrentpor
ti
onandnon-
cur
rentl
i
abi
li
ti
esfor
t
hel ong-t
erm por t
ion.

51. The features mostf requentl

yassociated wit
h pref
erence shar
es i
ncl
ude al
loft
he
fol
l
owi ngexcept
a.Cal lableattheopt
ionoft heshar
eholder
.
b.Conv erti
blei
ntoor
di nar
yshares.
c. Non- voti
ng.
d.Pref erenceastoasset si
nt heev
entofliqui
dati
on.
15-16 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

52. When pr efer

ence shar es shar
er at
ablywit
ht he or
dinar
yshar
ehol
der
sin anypr
ofi
t
di
stri
buti
onsbey ondt heprescri
bedratet
hisi
sknownast he
a.Cumul ati
vefeature.
b.Par t
icipati
ngfeature.
c. Call
ablefeature.
d.Redeemabl efeature.

53. Li
quidati
ngdivi
dends
a.Ar eprohi
bit
edunderIFRS.
b.Requi r
eacredittoShar
eCapital
—Ordi
nary
.
c. Reduceamount spai
d-i
nbysharehol
der
s.
d.Al loft
hechoicesarecorr
ect
.

54. Atthedat eofthef i

nancialstat
ements,or
dinar
yshar
esi
ssuedwoul
dexceedor
dinar
y
sharesoutst
andingasar esul
tofthe
a.decl ar
ati
onofashar espli
t.
b.decl ar
ati
onofashar edivi
dend.
c. purchaseoftreasuryshares.
d.pay mentinfullofsubscr i
bedshar
es.

55. Anentr
yisnotmadeont he
a.dateofdeclarat
ion.
b.dateofrecord.
c. dat
eofpayment .
d.Anentryismadeonal l
oft
hesedat
es.

56. Cashdivi
dendsar epaidonthebasi
softhenumberofshar
es
a.authorized.
b.issued.
c. out
standing.
d.outstandinglessthenumberoftr
easur
yshar
es.

57. Whichofthefol
lowingst
atementsaboutpr opertydi
vi
dendsisnottr
ue?
a.Apr opert
ydivi
dendisusuall
yintheform ofsecurit
iesofot
hercompani
es.
b.Apr opert
ydivi
dendisalsocall
edadividendi nki
nd.
c. Theaccounti
ngf orapropert
ydivi
dendshoul dbebasedont hecar
ryi
ngval
ue(
book
val
ue)ofthenonmonetaryassetst
ransferred.
d.Al l
ofthesestat
ementsaretrue.

58. HouserCorpor ati

onowns4,000,
000shar
esofBahaCorporat
ion.OnDecember31,2012,
Houserdistri
butedtheseshar
esasadivi
dendt
oitssharehol
ders.Thi
sisanexampleofa
a.pr opert
ydi vi
dend.
b.shar edividend.
c. l
iquidat
ingdi v
idend.
d.cashdi vidend.

59. Adivi
dendwhichisaretur
ntoshar
ehol
der
sofapor
ti
onoft
hei
ror
igi
nal
inv
est
ment
sisa
a.li
quidat
ingdiv
idend.
b.propert
ydivi
dend.
c. l
i
abil
it
ydivi
dend.
 Equi
ty 15-17

d.par
ti
cipat
ingdi
vi
dend.
15-18 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

60. A mining companydecl ared a l

i
qui
dat
ing di
vi
dend.The j
our
nalent
ryt
orecor
dthe
decl
arati
onmustincludeadebitto
a.Ret ai
nedEarni
ngs.
b.Shar ePremium.
c. AccumulatedDeplet
ion.
d.Accumul atedDepreciat
ion.

61. Ifmanagementwi shest

o"capi
tal
i
ze"par
toft
heear
nings,
itmayi
ssuea
a.cashdi vidend.
b.shar edividend.
c. propert
ydi vi
dend.
d.liquidat
ingdi v
idend.

62. Whichdivdendsdonotr
i educeequi
ty?
a.Cashdi vi
dends
b.Shar edi
vidends
c. Proper
tydivi
dends
d.Liquidat
ingdivi
dends

63. Thedeclarati
onandi ssuanceofashar ediv
idendlargerthan25%oft hesharespr
evi
ousl
y
out
standing
a.increasesor dinar ysharesout st
andingandincreasest otalequi
ty.
b.decr easesret ainedear ningsbutdoesnotchanget ot
al equit
y.
c. mayi ncr
easeordecr easeshar epremium butdoesnotchanget otalequi
ty.
d.increasesret ainedear ningsandi ncr
easestotalequit
y.

64. Quir
kCor porat
ionissueda100% shar edivi
dendofitsordi
nar
yshar
eswhichhadapar
val
ueof$10bef oreandaf t
ert hedivi
dend.Atwhatamountshoul
dretai
nedear
ningsbe
capi
tal
i
zedf ortheaddit
ionalsharesissued?
a.Thereshoul dbenocapi tali
zat
ionofretai
nedear
nings.
b.Parv alue
c. Fai
rvalueont hedeclar
ationdate
d.Fairvalueont hepaymentdat e

65. Theissuerofa5% or dinaryshar edi

videndtoordinaryshar
eholder
sprefer
abl
yshoul
d
tr
ansferfr
om retai
nedear ni
ngst ocont
ributedcapi
talanamountequaltot
he
a.fairvalueofthesharesissued.
b.bookv alueoftheshar esissued.
c. minimum legalr
equirement s.
d.parorst at
edv al
ueoft heshar esi
ssued.

66. Att
hedat eofdecl
ar at
ionofasmal lor
dinaryshar
edi
vi
dend,
theent
r dnoti
yshoul ncl
ude
a.acr editt
oOrdinaryShareDivi
dendPay abl
e.
b.acr editt
oSharePr emium—Or di
nary.
c. adebittoRet
ainedEarnings.
d.Alloftheseareacceptable.
 Equi
ty 15-19

67. ThebalanceinOrdinar
yShareDi videndDi
str
ibut
abl
eshoul
dber
epor
tedasa(
n)
a.deduct i
onfrom sharecapi
tal—or di
nar
y.
b.additiontosharecapit
al—ordinary.
c. cur
rentli
abil
it
y.
d.cont r
acurrentasset
.

68. Afeaturecommont obot hshar espli

tsandsharedivi
dendsi
s
a.at ransfertoearnedcapital ofacorporat
ion.
b.t hattherei
snoef fectont otalequi
ty.
c. anincreaseintotall
iabi
li
tiesofacor porati
on.
d.ar eductioninthecontri
but edcapitalofacorpor
ati
on.

69. Whatef
fectdoest
hei
ssuanceofa2-
for
-1shar
espl
i
thav
eoneachoft
hef
oll
owi
ng?
ParValueperShare Ret
ainedEarni
ngs
a. Noef f
ect Noef f
ect
b. Incr
ease Noef f
ect
c. Decrease Noef f
ect
d. Decrease Decrease

70. Whichoneoft hef oll

owingdiscl
osur
esshoul
dbemadei ntheequit
ysectionoft
he
st
atementoffinancialposi
ti
on,rat
hert
hani
nthenot
est
othef
inanci
alst
atements?
a.Divi
dendpr efer
ences
b.Liqui
dationpreferences
c. Cal
lpri
ces
d.Conv er
sionorexer ci
sepri
ces

71. Therateofret
urnonordinaryshareiscalculatedbydi vi
ding
a.neti ncomelesspr
eferencedividendsbyav erageordinarysharehol
ders’equi
ty.
b.neti ncomebyaverageordinaryshareholder s’equi
ty.
c. netincomelesspr
eferencedividendsbyendi ngordinarysharehol
ders’equi
ty.
d.neti ncomebyendingordinaryshareholders’ equi
ty.

72. Thepay outr

atiocanbecal cul
atedbydi v
idi
ng
a.di v
idendspersharebyear ningspershar e.
b.cashdi vi
dendsbyneti ncomel esspr
eferencedi
vi
dends.
c. cashdivi
dendsbymar ketpr icepershare.
d.di v
idendspersharebyear ningspershar eanddi
vi
dingcashdi
vi
dendsbyneti
ncome
l
esspr ef
erencedi
vidends.

73. YoungerCompanyhas out standing bot h ordi

nar yshares and nonpar t
ici
pati
ng,non-
cumulat
iveprefer
enceshar es.Thel iquidati
onv alueoft hepr ef
erenceshar esisequalt
o
i
tsparvalue.Thebookv al
uepershar eoft heordinarysharesisunaf f
ectedby
a.thedecl ar
ati
onofashar ediv i
dendonpr eferencepay ableinpreferenceshareswhen
t
hemar ketpri
ceoft hepreferencei sequal t
oi tsparvalue.
b.thedecl ar
ati
onofashar edi vi
dendonor dinarysharespay ableinordinaryshar
eswhen
t
hemar ketpri
ceoft heordinaryshar esisequal toit
sparv alue.
c. t
hepay mentofapr evi
ouslydecl aredcashdi videndont heor di
naryshares.
d.a2- f
or-1spli
toftheordinaryshar es.
15-20 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on
P
74. Ordi
narysharehol
ders'equi
tydi
vi
dedbyt
henumberofshar
esout
standi
ngi
scal
l
ed
a.bookv aluepershare.
b.parv al
uepershar e.
c. st
atedvaluepershare.
d.mar ketvaluepershare.

75. Whichoft
hefoll
owingisarequi
redstatementunderI
FRS?
St
atementoff
inanci
alposi
ti
on Statementofchangesi
nequi
ty
a. Yes No
b. Yes Yes
c. No No
d. No Yes

76. Tr
adingont heequityi
s:
a.Ther ati
ooft hecompany’
scashdi videndst oneti
ncome.
b.Ar et
ur nonassetsthati
shigherthant hecostoffi
nancingt
heseasset
s.
c. Theamounteachshar ewouldr ecei
v eifthecompanywereli
qui
dated.
d.The“ Revaluati
onSurpl
us”r
elatedt oincreasesordecr
easesini
temssuchaspr
oper
ty,
pl
ant,andequipment.

*
77. Di
videndsarenotpaidon
a.noncumul ati
veprefer
enceshares.
b.nonpar t
ici
patingpr
eferenceshares.
c. tr
easuryshares.
d.Di vi
dendsarepaidonal loft
hese.

*
78. Noncumul at
ivepr
eferreddivi
dendsinarr
ears
a.ar enotpaidordisclosed.
b.mustbepai dbeforeanyothercashdivi
dendscanbedist
ri
but
ed.
c. arediscl
osedasal iabi
li
tyunti
lpai
d.
d.ar epaidtopr ef
erenceshar ehol
der
sifsuffi
cientf
undsremai
naft
erpay
mentoft
he
curr
entprefer
encedi vi
dend.

*
79. How shouldcumul ati
vepr efer
encedivi
dendsinar r
earsbeshowni nacorpor
ati
on's
st
atementoffinancialposit
ion?
a.Not ediscl
osure
b.Increaseinshareholders'equit
y
c. I
ncreaseincurrentli
abil
iti
es
d.Increaseincurrentli
abili
ti
esfortheamountexpectedt
obedecl
aredwi
thi
ntheyearor
operat
ingcycl
e, andincreaseinnon-
curr
entl
iabi
li
ti
esfort
hebal
ance
 Equi
ty 15-21

Mul
ti
pleChoi
ceAnswer
s—Concept
ual
I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans.
21. c 30. d 39. a 48. b 57. c 66. a 75. b
22. b 31. d 40. a 49. b 58. a 67. b 76. b
23. a 32. b 41. d 50. c 59. a 68. b *
77. c
24. b 33. a 42. c 51. a 60. b 69. c *
78. a
25. b 34. b 43. a 52. b 61. b 70. b *
79. a
26. c 35. a 44. a 53. c 62. b 71. a
27. c 36. d 45. b 54. c 63. b 72. b
28. c 37. b 46. c 55. b 64. b 73. c
29. d 38. b 47. c 56. c 65. a 74. a

MULTI
PLECHOI
CE—Comput
ati
onal
Uset
hef
oll
owi
ngi
nfor
mat
ionf
orquest
ions80and81.
Pr
esent
edbel
owi
sinf
ormat
ionr
elat
edt
oHal
eCor
por
ati
on:
ShareCapit
al—Ordinary,$1par $4,
300,
000
Sharepremium—Or dinary 550,
000
ShareCapit
al—Preference81/2%,$50par 2,
000,
000
Sharepremium—Pr eference 400,
000
Retai
nedEarnings 1,
500,
000
Treasur
yShares—Or dinary(
atcost
) 150,
000

80. Thetot
alequi
tyofHal
eCor
por
ati
oni
s
a.$8,600,
000.
b.$8,750,
000.
c. $7,
100,
000.
d.$7,250,
000.

81. Thetot
alcont
ri
but
edcapi
tal
rel
atedt
otheor
dinar
yshar
esi
s
a.$4,300,
000.
b.$4,850,
000.
c. $5,
250,
000.
d.$4,700,
000.

82. ManningCompanyissued10,000sharesofit
s$5parv al
ueor
dinaryshar
eshav i
ngaf ai
r
val
ueof$25pershareand15, 000sharesofi
ts$15parval
uepref
erenceshareshavi
nga
fai
rval
ueof$20pershareforal umpsum of$480,
000.Howmuchoft heproceedswould
beall
ocat
edtotheordi
naryshares?
a.$50,000
b.$218,182
c. $250,
000
d.$255,000
15-22 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

83. NortonCompanyi ssues4,000sharesofits$5parval

ueordi
naryshareshav i
ngaf ai
r
val
ueof$25pershar eand6, 000sharesofi
ts$15parval
uepref
erenceshareshavi
nga
fai
rv al
ueof$20pershar ef oralumpsum of$192,
000.Whatamountoft heproceeds
shouldbeall
ocat
edt otheprefer
enceshar
es?
a.$172, 000
b.$120, 000
c. $104,727
d.$90, 000

84. Berr
yCor porationhas50,000shar esof$10paror di
nar
yshar esaut hori
zed.Thefol
l
owi
ng
tr
ansactionstookplacedur i
ng2010, thefi
rstyearofthecorpor at
ion’sexi
stence:
Sold5,000ordinarysharesfor$18pershar e.
Issued5, 000ordinar
yshar esinexchangef orapatentvaluedat$100, 000.
Attheendoft heBer ry
’sfi
rstyear,tot
alcontri
butedcapital
amount edto
a.$40, 000.
b.$90, 000.
c. $100,000.
d.$190, 000.

85. GlavineCompanyi ssues6,

000sharesofi
ts$5parvalueor
dinar
yshareshavi
ngamar ket
valueof$25pershar eand9,
000sharesofi
ts$15parv al
ueprefer
enceshareshav
inga
fai
rv al
ueof$20pershar eforalumpsum of$288,000.Theproceedsal
locatedt
ot he
ordinarysharesi
s
a.$30, 000
b.$130, 909
c. $150, 000
d.$157, 091

86. Wheel erCompanyissued5,000sharesofit

s$5parval
ueordi
nar
yshareshavi
ngamarket
valueof$25pershar eand7, 500sharesofit
s$15parval
uepref
erenceshar
eshav
inga
mar ketvalueof$20pershareforalumpsum of$240,
000.Thepr
oceedsall
ocat
edt
ot he
preferencesharesi
s
a.$215, 000
b.$150, 000
c. $130, 909
d.$109, 091

87. Hir
oCor p.issues1,000€5parv al
ueordinar
ysharesand1,
000€20parv al
uepref
erence
sharesforal umpsum of€60, 000.Att
hei ssuedate,t
heor
dinar
yshar
eswer esel
l
ingfor
€36 and the preference shar
es were sell
i
ng for€28.The Shar
e Premi
um—Or di
nary
accountwil
l becredi
t edf
or
a.€31,000
b.€36,000
c. €26,
250
d.€28,750
 Equi
ty 15-23

88. HiroCor
p.issues1,000€5parv al
ueordinarysharesand1,000€20parv al
uepreference
sharesf
oral umpsum of€60, 000.Atthei ssuedate,theor
dinar
yshar
eswer esel
lingf or
€36andt hepr efer
enceshareswer esel l
ingf or€28.How muchi srecor
dedi nHi ro’s
stat
ementoff i
nanci
alposi
ti
onf orthepreferenceshares?
a.€31,000
b.€36,000
c. €26,
250
d.€28,750

89. OnJanuar y1HiroCor p.issues1, 000no- paror

dinar
ysharesfor€15pershare.Theshar
es
haveast atedval
ueof€5pershar e.WhenHi r
opreparesthejour
nalentr
yt orecor
dthe
i
ssuanceoft heshareswhi choft hefollowi ngwil
lberecor
ded?
a.Debi tShareCapital—Or dinary€5,000.
b.Cr editShar
eCapi tal—Or dinary€15,000.
c. DebitSharePremi um—Or dinary€15, 000.
d.Cr editShar
ePr emi um—Or dinar
y€10, 000

90. Fiv
ey earsago,DunnTr adi
ngCo.i ssued2,500ordi
naryshares.Theshar
eshav
ea₤2par
val
ueandsol datt hatti
mef or₤12pershar e.OnJanuar y1,2012,DunnTradi
ngCo.
Purchased 1,000 oft hesesharesf or₤24 pershare.OnSept ember30,2012,Dunn
rei
ssued500oft hesharesfor₤28pershar e.Thejournalentr
ytorecor
dtherei
ssuance
wil
lincl
ude
a.Adebi ttoTreasuryShares₤12,000.
b.Acr editt
oShar ePremium—Tr easury₤2,000.
c. Acr editt
oTr easuryShares₤14,000.
d.Acr editt
ocash₤14, 000.

91. PemberCor porati

onstartedbusi nessin2005byi ssui
ng200,000shar esof$20par
ordinarysharesfor$36each.I n2010,20,
000oft heseshareswerepur
chasedf or$52per
sharebyPemberCor porat
ionandhel dastreasuryshares.OnJune15,
2011, these20,
000
shareswer eexchangedf orapi eceofpropertythathadanassessedv alueof$810, 000.
Perber’ssharesareacti
velytradedandhadaf ai
rpriceof$60onJune15, 2011.Thecost
met hodisusedt oaccountf ortreasur
yshares.Theamountofshar epr emi um—t r
easury
result
ingfrom theaboveev entswouldbe
a.$800, 000.
b.$480, 000.
c. $390,000.
d.$160, 000.

92. OnSept ember1,2012,Val dezCompanyr eacquired12,

000sharesofi t
s$10parv alue
ordi
narysharesf or$15pershar e.Valdezusesthecostmet hodt oaccountfortr
easury
shares.Thejournalent
rytorecordthereacqui
sit
ionofthesharesshoulddebit
a.Tr easurySharesfor$120,000.
b.Shar eCapital—Ordi
naryfor$120,000.
c. ShareCapital—Ordi
naryfor$120,000andShar ePremi
um—Or dinar
yf or$60,
000.
d.Tr easurySharesfor$180,000.
15-24 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

93. GannonCompanyacqui red6,000shar esofitsownor dinarysharesat$20pershar eon

Februar y5,2010,andsold3,000oft hesesharesat$27pershar eonAugust9, 2011.The
fairvalueofGannon'sor di
naryshareswas$24pershar eatDecember31,2010,and$25
pershar eatDecember31,2011.Thecostmet hodisusedt or ecordtr
easuryshares
transactions.Whataccount(s)shouldGannoncr editin2011t or ecordthesal
eof3, 000
shares?
a.Tr easuryShar
esf or$81,
000.
b.Tr easuryShar
esf or$60,
000andShar ePremium—Tr easuryfor$21,000.
c. Tr easuryShar
esf or$60,
000andRet ai
nedEarningsfor$21,000.
d.Tr easuryShar
esf or$72,
000andRet ai
nedEarningsfor$9,000.

94. LongCo.i ssued100,

000shar
esof$10parordinarysharesfor$1,200,000.Longacquired
8,000shar esofitsownsharesat$15pershare.Threemont hslaterLongsol d4,000of
theseshar esat$19pershare.Ift
hecostmet hodisusedt or ecordtreasuryshares
transactions,t
orecor
dthesal
eofthe4,
000treasuryshares,Longshoul dcredit
a.Tr easurySharesf
or$76,
000.
b.Tr easurySharesf
or$40,
000andShar
ePremi um—Tr easuryfor$36,000.
c. Tr easurySharesf
or$60,
000andShar
ePremi um—Tr easuryStockf or$16,000.
d.Tr easurySharesf
or$60,
000andShar
ePremi um—Or dinaryfor$16,000.

95. Ananal
ysi
sofequi
tyofHahnCor
por
ati
onasofJanuar
y1,
2012,
isasf
oll
ows:
Sharecapi t
al—ordinary,parv al
ue$20; aut
hori
zed100,000shar
es;
issuedandout standing90,000shar es $1,
800,
000
Sharepr emium—or di
nary 900,
000
Retainedear nings 760,
000
Total $3,
460,
000
Hahnusest hecostmet hodofaccount i
ngfortreasuryshar
esanddur
ing2010ent
ered
i
ntothef ollowingtransact i
ons:
Acquir ed2,500ofi tsshar esfor$75,000.
Sol
d2, 000t r
easuryshar esat$35pershar e.
Sol
dt her emainingt r
easur ysharesat$20pershar e.
Assumingnootherequi
tytr
ansacti
onsoccur
reddur
ing2012,
whatshoul
dHahnr
epor
tat
December31,2012,
astotalshar
epremi
um?
a.$895,000
b.$900,000
c. $905,
000
d.$915,000

96. PercyCorporati
onwasor ganizedonJanuar y1,2012,withanauthor
izat
ionof1,
200,
000
ordinar
yshareswi t
haparv alueof$6pershar e.During2012,thecorpor
ati
onhadthe
fol
lowingcapit
altr
ansact
ions:
January5 i
ssued675, 000shar
es@ $10pershar e
July28 pur
chased90, 000shares@ $11pershare
December31 sol
dthe90, 000shareshel
dintreasury@ $18pershar
e
Per
cyusedthecostmet
hodtorecor
dthepurchaseandrei
ssuanceofthet
reasur
yshar
es.
Whatisthet
otal
amountofshar
epremium asofDecember31,2012?
a.$-0-.
b.$2,070,
000.
c. $2,
700,
000.
 Equi
ty 15-25

d.$3,330,
000.
97. SosaCo.'
sequi
tyatJanuar
y1,
2012i
sasf
oll
ows:
Sharecapital—ordi
nary,
$10parval
ue;
aut
hor
ized300,
000shar
es;
Outstanding225,000shar
es $2,
250,
000
Sharepremi um—or di
nary 900,
000
Retai
nedear nings 2,
190,
000
Total $5,
340,
000
Dur
ing2012,
Sosahadt
hef
oll
owi
ngshar
etr
ansact
ions:
Acqui
red6,
000sharesofitssharesf
or$270,
000.
Sol
d3,600tr
easurysharesat$50ashare.
Sol
dtheremaini
ngtreasuryshar
esat$41pershar
e.
Noot hersharetr
ansact
ionsoccurredduri
ng2012.Assumi
ngSosausest
hecostmethod
torecordtreasur
ysharetransact
ions,t
hetot
alamountofal
lshar
epremi
um account
sat
December31, 2012is
a.$891, 600.
b.$870, 000.
c. $908,400.
d.$927, 600.

98. Presentedbelowist heequi tysecti

onofOaksCor porati
onatDecember31,2010:
Sharecapital—ordinar y
,parv al
ue$20;aut
hor i
zed75,
000shares;
issuedandout standing45,000shares $ 900,
000
Sharepr emium—or di
nar y 250,
000
Retainedearnings 500,
000
$1,650,
000
During2011, t
hefollowingt r
ansactionsoccurr
edrelati
ngtoequi
ty:
3,
000shar
eswer
er eacqui
redat$28pershar
e.
3,
000shar
eswer
er eacqui
redat$35pershar
e.
1,
800shar
esoft
reasuryshareswer
esoldat$30pershar
e.
FortheyearendedDecember31, 2011,Oaksrepor
tednetincomeof$450,000.Assuming
Oaksaccountsfortr
easuryunderthecostmethod,whatshouldi
trepor
tastotalequi
tyon
i
tsDecember31, 2011,
statementoffi
nancial
posit
ion?
a.$1,965,000.
b.$1,961,400.
c. $1,
957,800.
d.$1,515,000.

99. OnDecember1,2012,AbelCor porat

ionexchanged20,000sharesofits$10parv al
ue
or
dinaryshareshel
dintreasuryforausedmachi ne.Thet
reasuryshar
eswer eacqui
redby
Abelatacostof$40pershar e,andareaccountedforunderthecostmethod.Onthedate
oftheexchange,theordinar
yshar eshadaf ai
rv al
ueof$55pershar e(theshareswere
or
iginall
yissuedat$30pershar e).Asar esul
toft hi
sexchange,Abel'
st ot
alequi
tywill
i
ncreaseby
a.$200, 000.
b.$800, 000.
c. $1,100,
000.
d.$900, 000.
15-26 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on
 Equi
ty 15-27

100. LutherInc.
,has2,000sharesof6%,$50parv al
ue,cumulat
ivepr
eferenceshar esand
100,000sharesof$1parv al
ueordi
narysharesoutst
andi
ngatDecember31,2011,and
December31,2010.Theboardofdirect
orsdeclar
edandpaida$5,000di v
idendi n2010.
In2011,$24,000ofdi
vi
dendsaredeclaredandpaid.Whatarethedi
videndsr ecei
vedby
thepref
erenceshar
ehol
dersin2011?
a.$17, 000
b.$12, 000
c. $7,000
d.$6, 000

101. Anders,Inc.
, has5,
000sharesof5%,$100parvalue,cumulati
vepr ef
erenceshar
esand
20,000sharesof$1parv al
ueordi
naryshar
esoutstandingatDecember31, 2011.There
wer enodividendsdeclar
edin2009.Theboardofdirect
orsdeclaresandpay sa$45,000
div
idendi n2010andi n2011.Whatistheamountofdi v
idendsreceivedbytheordi
nary
shareholder
si n2011?
a.$15, 000
b.$25, 000
c. $45,000
d.$0

102. ColsonI nc.decl

areda$160,000cashdi
vidend.I
tcurrentl
yhas6,000sharesof7%,$100
parv aluecumulati
vepr
eferenceshar
esoutstandi
ng.Itisoneyearinar
rearsonit
s
preferenceshares.Howmuchcashwi ll
Colsondistr
ibutetotheordi
naryshar
eholder
s?
a.$76, 000.
b.$84, 000.
c. $118, 000.
d.None.

103. EverwoodCo.i ssues10, 000shar esof£10parv al

ueconv erti
bleprefer
encesharesfor
£12cashpershar e.Eachshar eisconv erti
bleint
o4or dinaryshares.Onthisdatethe£1
parvalueor dinaryshar esaresel l
ingfor£3pershar e.Approximately2yearslat
er,
Everwood’ ssharehol dersconv ertthei
rpr efer
enceshar esintoordi
naryshares.Onthedate
ofconv ersionthepr eferenceshar esaresel li
ngfor£16andt heordinar
ysharesaresell
i
ng
for£5pershar e.Thej ournalentryont hedat eofissuancewi ll
includewhichofthe
fol
lowing?
a.Cr edi tShareCapi tal—Preference£20, 000.
b.Cr edi tSharePr emi um—Or dinary£20, 000.
c. Credi tShareCapi tal—Preference£100, 000.
d.Debi tSharePr emi um—Or dinar y£20,000.

104. EverwoodCo.i ssues10, 000shar esof£10parv al

ueconverti
blepr eferencesharesfor
£12cashpershar e.Eachshar eisconv erti
bleint
o4ordinaryshares.Ont hi
sdat ethe£1
parvalueordinaryshar esaresel l
ingfor£3pershar e.Approximatel y2y ear
sl at
er,
Everwood’ssharehol dersconv ertthei
rpr efer
encesharesintoordinar yshares.Onthedate
ofconv er
sionthepr eferenceshar esaresel li
ngfor£16andt heordi narysharesaresell
i
ng
for£5pershar e.Thej ournalentryont hedat eofconversi
onwi l
lincl udewhichofthe
fol
lowing?
a.Cr editShareCapi tal—Preference£20, 000.
b.Cr editSharePr emi um—Or dinary£80, 000.
c. CreditShareCapi tal—Ordinary£100, 000.
d.Cr editSharePr emi um—Or dinary£160, 000.
15-28 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

105. PiersonCorporationowned10, 000shar esofHunt erCorporati

on.Theseshar
eswer e
purchasedin2009f or$90,000.OnNov ember15, 2011,Pier
sondeclaredapr
operty
divi
dendofoneshar eofHunt erf oreveryt ensharesofPiersonhel
dbyashar ehol
der.On
thatdate,whent hemar ketpri
ceofHunt erwas$14pershar e,
ther
ewer e90,
000sharesof
Piersonoutstanding.Whatgai nandnetr eductioninret
ainedearni
ngswouldresul
tfrom
thi
spr opert
ydividend?
Gain NetReduct i
oni n
RetainedEarni ngs
a. $0 $126, 000
b. $0 $81, 000
c. $45,000 $81, 000
d. $45,000 $36, 000

106. StinsonCor porationowned30, 000sharesofMat ileCorporation.Theseshareswer e

pur chasedin2009f or$270,000.OnNov ember15, 2011,Stinsondeclaredapr operty
dividendofoneshar eofMat i
l
ef orever
yt ensharesofSt i
nsonhel dbyashar eholder.On
thatdat e,whent hemar ketpriceofMatilewas$14pershar e,ther
ewer e270,000shar es
ofSt insonoutstanding.Whatgai nandnetr educt
ioninretainedearningswouldr esul
t
from t hi
spropertydividend?
Gain NetReduct i
oni n
RetainedEarnings
a. $0 $243, 000
b. $0 $378, 000
c. $135,
000 $108,000
d. $135,
000 $243,000

107. WingerCorporationowned900, 000sharesofFeganCor porati

on.OnDecember31,2012,
whenWi nger'
saccount" I
nvest
mentinFeganCor por
ation"hadacar r
yingval
ueof$5per
share,
Wingerdi str
ibut
edt heseshar
estoitsshareholdersasadi v
idend.Wingeror
igi
nal
l
y
paid$8f oreachshar e.Feganhas3, 000,
000shar esi ssuedandout standi
ng,whichar
e
tr
adedonanat i
onalst ockexchange.Thequot edmar ketpriceforaFeganshar ewas$7
onthedeclarat
iondat eand$9ont hedistr
ibut
iondate.
Whatwouldbether
educt
ioni
nWi
nger
'sequi
tyasar
esul
toft
heabov
etr
ansact
ions?
a.$3,600,
000.
b.$4,500,
000.
c. $7,
200,
000.
d.$8,100,
000.

108. GibbsCor porationowned20, 000shar esofOliv

erCor porati
on’s$5parv al
ueordinar
y
shares.Theseshar eswer epur chasedin2009f or$180,000.OnSept ember15,2011,
Gibbsdeclaredapr opertydividendofoneshareofOl i
verf oreverytensharesofGibbs
heldbyashar eholder.Ont hatdate,whenthemar ketpri
ceofOl iverwas$14pershar e,
ther
ewer e180, 000shar esofGi bbsoutst
andi
ng.WhatNETr educti
oninretai
nedearni
ngs
wouldresultfrom thispropertydivi
dend?
a.$90, 000
b.$252, 000
c. $72,000
d.$162, 000
 Equi
ty 15-29

109. Melvern’sCor porat

ionhasani nv
estmentin5,000sharesofWall
aceCompanyor dinar
y
shares wi t
h a costof$218, 000.These shares ar
e used i
n a pr
oper
tydiv
idend to
shareholdersofMel ver
n’s.Thepropert
ydivi
dendisdeclar
edonMay25andschedul edto
bedi str
ibutedonJul y31t oshar ehol
der
sofr ecordonJune15.Themar ketval
ueper
Wallaceshar eis$63onMay25,$66onJune15,and$68onJul y31.Theneteffectof
thi
spr opertydivi
dendonr et
ainedearni
ngsisareducti
onof
a.$340, 000.
b.$330, 000.
c. $315, 000.
d.$218, 000.

110. HernandezCompanyhas350, 000sharesof$10parv al

ueordinaryshar
esoutstanding.
Duringthey ear
,Hernandezdecl
areda10%shar edi vi
dendwhent hemarketpri
ceoft he
stockwas$30pershar e.Fourmont hsl
aterHernandezdecl
areda$. 50persharecash
di
v i
dend.As a r esul
toft he di
v i
dends decl
ared duri
ng t
he y ear
,ret
ained earni
ngs
decreasedby
a.$1, 242,
500.
b.$525, 000.
c. $192,500.
d.$175, 000.

111. OnJune30,2012,whenEr
mlerCo.
'
sst
ockwassel
l
ingat$65pershar
e,i
tsequi
ty
account
swer
easfol
l
ows:
Sharecapi
tal—ordi
nary(
parv
alue$50;
60,
000shar
esi
ssued) $3,
000,
000
Sharepremium—or di
nar
y 600,
000
Retai
nedearnings 4,
200,
000
Ifa100%sharedi
vi
dendwer
edecl
aredanddi
str
ibut
ed,
shar
ecapi
tal
—or
dinar
ywoul
dbe
a.$3,000,
000.
b.$3,600,
000.
c. $6,
000,
000.
d.$7,800,
000.

112. Theequi
tysectionofGunkel Corporat
ionasofDecember31,2010,
wasasf oll
ows:
Sharecapital—ordi
nary,parval
ue$2;author
ized20,
000shar
es;
issuedandout standing10,
000shares $20, 000
Sharepremi um—or di
nary 30,000
Retainedearnings 75,000
$125,000
OnMar ch1,2011,t heboar
dofdirect
orsdecl
areda15%sharedivi
dend,andaccor
dingl
y
1,
500addi t
ionalshareswer
eissued.OnMarch1,2011,
thefai
rval
ueoft heshar
ewas$6
pershare.Forthet womonthsendedFebruar
y28,2011,Gunkelsust
ainedanetlossof
$10,
000.
Whatamountshoul
dGunkel
repor
tasr
etai
nedear
ningsasofMar
ch1,
2011?
a.$56,000.
b.$62,000.
c. $66,
000.
d.$72,000.
15-30 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

113. Theequi
tyofHowel
lCompanyatJul
y31,
2012i
spr
esent
edbel
ow:
sharecapit
al—ordinary,
parval
ue$20,
author
ized400,
000shar
es;
issuedandout standi
ng160,
000shares $3,
200,
000
Sharepremium—or di
nary 160,
000
Retainedear
nings 650,
000
$4,
010,
000
OnAugust1,2012,t heboardofdi r
ectorsofHowel ldeclar
eda15% shar edividendon
ordi
naryshares,t o bedi
stri
buted onSept ember15t h.Themar ketpri
ceofHowel l'
s
ordi
naryshareswas$35onAugust1, 2012,and$38onSept ember15,2012.Whati sthe
amountoft hedebittoret
ainedearni
ngsasar esul
toft hedeclar
ati
onanddistr
ibutionof
thi
ssharedividend?
a.$800,000.
b.$840,000.
c. $912,
000.
d.$600,000.

114. OnJanuary1,2012,Dodd,
Inc.
,decl
areda10%or di
narysharedi
vi
dendwhenthef
airv
alue
oftheordi
naryshar
eswas$20pershar e.Equi
tybeforetheshar
edivi
dendwasdecl
ared
consi
stedof:
Sharecapital—ordi
nary,$10parval
ue,author
ized200,
000shar
es;
issuedandout standing120,
000shares $1,
200,
000
Sharepremi um—or di
nary 150,
000
Retainedearnings 700,
000
Totalequit
y $2,
050,
000
Whatwast heef
fectonDodd’
sret
ainedear
ningsasar
esul
toft
heabov
etr
ansact
ion?
a.$120,000decrease
b.$240,000decrease
c. $400,
000decrease
d.$200,000decrease

115. OnJanuar y1,2012,Cul

verCorporat
ionhad110, 000shar esofit
s$5parv al
ueordinary
sharesout st
anding.OnJune1,thecor porat
ionacquired10,000sharestobeheldint he
tr
easur y
.OnDecember1,whent hemar ketpriceoftheshar eswas$8,t hecor
porati
on
declareda10%shar edi
videndtobei ssuedt osharehol
dersofrecordonDecember16,
2012.Whatwast heimpactofthe10% shar edivi
dendont hebalanceoftheret
ained
earningsaccount?
a.$50, 000decrease
b.$80, 000decrease
c. $88,000decrease
d.Noef fect

116. Atthebeginni
ngof2011, Flahert
yCompanyhadr etai
nedearni
ngsof$200,000.Duri
ngthe
yearFlaher
tyrepor
tednetincomeof$100, 000,soldtr
easuryshar
esata“ gai
n”of$36,000,
declar
edacashdi vi
dendof$60, 000,anddeclaredandi ssuedasmallsharedi
videndof
3,000shares($10parval
ue)whent hefairval
ueoft heshareswas$20pershar e.The
amountofr et
ainedear
ningsav ail
ablefordivi
dendsatt heendof2011was
a.$180, 000.
b.$210, 000.
c. $216,000.
 Equi
ty 15-31

d.$246, 000.
117. Mast er
sonCompanyhas420, 000sharesof$10parv alueordi
narysharesoutst
anding.
Duri
ngt heyearMastersondeclar
eda5%shar edi
videndwhent hemar ketpr
iceofthe
shareswas$36pershar e.Threemonthsl
aterMastersondeclareda$.60persharecash
div
idend.Asar esul
tofthedivi
dendsdecl
areddur
ingt heyear,
retai
nedearni
ngs
decreasedby
a.$1, 020,
600
b.$756, 000
c. $264,600
d.$252, 000

118. Atthebeginningof2011, Hami l

tonCompanyhadr etai
nedear ni
ngsof$150,000.During
theyearHami lt
onreport
edneti ncomeof$75, 000,
soldtreasurysharesata“gain”of
$27,000,decl
aredacashdi v
idendof$45,000,anddecl
aredandi ssuedasmal lshare
divi
dendof1,500shares( $10parv alue)whenthefai
rvalueoftheshareswas$30per
share.Theamountofr etainedearningsavai
labl
efordiv
idendsatt heendof2011was:
a.$184, 500.
b.$162, 000.
c. $157,500.
d.$135, 000.

119. MingenbackCompanyhas560, 000shar

esof$10parv al
ueordi
narysharesout st
anding.
Duri
ngt heyearMingenbackdeclar
eda5%shar edivi
dendwhent hemarketpriceofthe
shareswas$48pershar e.Twomont hslaterMingenbackdecl
areda$.60pershar ecash
div
idend.Asar esul
tofthedi
videndsdeclaredduri
ngtheyear,
retai
nedearnings
decreasedby:
a.$336, 000.
b.$352, 800.
c. $1,344,
000.
d.$1, 696,
800.

120. JanaeCorpor ati

onhasout standi
ng10,000shar esof£10parv al
ueordi
nar
yshar
esand
ret
ainedearningsof£500, 000.IfJanaedeclaresa10per centshar
edi
vi
dendwhenthef
air
val
ueoftheshar esis£85pershar e,t
heent r
yincludes:
a.Adebi ttoRet ai
nedEarningsfor£10,000.
b.Acr edittoShar ePr emium—Or di
naryfor£75,000.
c. Adebittocashf or£85,000.
d.Noent ryisr equiredforasharedivi
dend.

121. JanaeCorpor at
ionhasout standing10,000shar esof£10parv al
ueordi
nar
ysharesand
ret
ainedearningsof£500, 000.I fJanaedecl aresa2-for
-1shar
espli
twhenthef
airval
ue
ofthesharesis£85pershar e,theent r
yincludes:
a.Adebi ttoRet ainedEarni ngsf or£10,000.
b.Acr edittoShar ePr emium—Or di
naryfor£75,000.
c. Adebittocashf or£85,000.
d.Noent ryisr equiredforashar espli
t.
15-32 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

122. NikosCompanyhascashdi videndsof€210,

000andneti ncomeof€620,
000.I
tsor
dinar
y
sharehol
ders’equit
yis€2,
000,000andithas200, 000ordinar
yshar
esoutst
andi
ng.The
bookv al
uepersharefort
heNi kosCompanyis:
a.€10/ share.
b.€1. 05/shar
e.
c. €3.10/shar
e.
d.Cannotbedet er
minedbasedont hei
nfor
mationprov
ided.

123. NikosCompanypai d prefer

encedivi
dendsof€210, 000 and repor
ted netincomeof
€620,
000.Itsav
erageor dinaryshar
ehol
ders’equi
tyis€2, 000,
000andi thas200,000
ordi
naryshar
esoutstanding.Therateofretur
nonor dinaryshareequit
yf ortheNi
kos
Companyisappr
oximately:
a.31%.
b.21%.
c. 42%.
d.Cannotbedeterminedbasedont hei
nformati
onprovided.

124. NikosCompanypai dcashdivi

dendsof€210,000andreport
edneti
ncomeof€620,000.I
ts
averageordinar
ysharehol
ders’equi
tyis€2,000,
000andi thas200,
000ordi
naryshares
outstandi
ng.Pref
erencedi
videndsof€100,000weredeclar
edandpaiddur
ingtheperi
od.
Thepay outf
ortheNikosCompanyi sappr
oximatel
y:
a.40%.
b.50%.
c. 34%.
d.Cannotbedet er
minedbasedont hei
nformati
onprovi
ded.

Quest
ions125and126ar
ebasedont
hef
oll
owi
ngi
nfor
mat
ion.

LayneCor
porat
ionhadt
hef
oll
owi
ngi
nfor
mat
ioni
nit
sfi
nanci
alst
atement
sfort
hey
ear
sended
2010and2011:
Cashdi vi
dendsforthey ear2011 $ 8,
000
Netincomef ortheyearended2011 93,
000
Marketpr i
ceofshares,12/31/10 10
Marketpr i
ceofshares,12/31/11 12
Ordinaryshar
eholders’equit
y,12/31/10 1,
600,
000
Ordinaryshar
eholders’equit
y,12/31/11 1,
800,
000
Outstandingshares,12/31/11 150,
000
Preferencedi
videndsforthey earended2011 15,000

125. Whatisthepay
outr
ati
oforLay
neCor
por
ati
onf
ort
hey
earended2011?
a.24.7%
b.16.1%
c. 10.
3%
d.8.6%

126. Whatisthebookv
aluepershar
eforLay
neCor
por
ati
onf
ort
hey
earended2011?
a.$12.00
b.$11.90
c. $11.
33
 Equi
ty 15-33

d.$10.
67
15-34 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

Quest
ions127and128ar
ebasedont
hef
oll
owi
ngi
nfor
mat
ion.

Seal
yCorpor
ati
onhadt
hef
oll
owi
ngi
nfor
mat
ioni
nit
sfi
nanci
alst
atement
sfort
hey
ear
sended
2010and2011:
Cashdi vi
dendsforthey ear2011 $ 5,000
Netincomef ortheyearended2011 72,
000
Marketpr i
ceofshares,12/31/10 10
Marketpr i
ceofshares,12/31/11 12
Ordinaryshar
eholders’equit
y,12/31/10 1,
000,
000
Ordinaryshar
eholders’equit
y,12/31/11 1,
200,
000
Outstandingshares,12/31/11 100,
000
Preferencedi
videndsforthey earended2011 10,
000

127. Whatist
her
ateofr
etur
nonor
dinar
yshar
eequi
tyf
orSeal
yCor
por
ati
onf
ort
hey
earended
2011?
a.6.5%
b.6.0%
c. 5.
6%
d.5.2%

128. Whatisthepr
ice-
ear
ningsr
ati
oforSeal
yCor
por
ati
onf
ort
hey
earended2011?
a.16.1
b.16.7
c. 19.
4
d.21.1

129. Mays,Inc.hadneti ncomef or2010of$2, 120,

000andearni
ngspershar eonor dinar
y
shareof$5.Incl
udedint henetincomewas$300,000ofbondint
erestexpenserelatedto
i
tslong-t
erm debt.Theincomet axrat
efor2010was30%.Divi
dendsonpr efer
enceshar e
were$400,000.Thepay outrat
ioonor di
nar
ysharewas25%.Whatwer ethedividendson
ordi
narysharein2010?
a.$430,000.
b.$530,000.
c. $482,
500.
d.$645,000.

130. Pr
esent
edbel
owi
sinf
ormat
ionr
elat
edt
oOr
ender
,Inc.
:
December31,
2011 2010
Ordinaryshare $75,000$60, 000
4%Pr eferenceshare 350,000350,000
Retainedearnings(i
ncl
udesneti
ncomef
orcur
renty
ear
) 90,00075,000
Netincomef oryear 30,00032,000
WhatisOrender
’sr
ateofr
etur
nonor
dinar
yshar
eequi
tyf
or2011?
a.20.0%
b.10.7%
c. 18.
2%
d.21.3%
 Equi
ty 15-35

Uset
hef
oll
owi
ngi
nfor
mat
ionf
orquest
ions131and132.

Thef
oll
owi
ngdat
aar
epr
ovi
ded:
December31,
2011 2010
10%Cumul ati
veprefer
enceshar
e,$50par $100,000$100,000
Ordinaryshare$10par 120,00090,000
Sharepr emium 80,00065,000
Retainedearnings(i
ncl
udescurr
entyearneti
ncome) 240,000215,000
Netincome 90,000
Addi
ti
onalinf
ormati
on:
OnMay1,2011,3, 000sharesofor di
nar
ysharewereissued.Thepr
eferdi
vi
dendswerenot
decl
aredduri
ng2011.Themarketpr
iceoft
heordi
nar
ysharewas$50atDecember31,
2011.

131. Therat
eofret
urnonor
dinar
yshar
eequi
tyf
or2011i
s
a.90÷400.
b.90÷440.
c. 80÷400.
d.80÷440.

132. Thebookval
uepershar
eat12/
31/
11i
s
a.430÷12.
b.200÷12.
c. 330÷12.
d.440÷11.

Uset
hef
oll
owi
ngi
nfor
mat
ionf
orquest
ions133and134.

TurnerCor
por
ati
onhadt
hef
oll
owi
ngi
nfor
mat
ioni
nit
sfi
nanci
alst
atement
sfort
hey
earended
2010and2011:
Cashdi vi
dendsf orthey ear2011 $15,000
Netincomef orthey earended2011 124,
000
Marketpr i
ceofshar es,12/31/11 24
Ordinaryshareholders’equit
y,12/31/10 2,
200,
000
Ordinaryshareholders’equit
y,12/31/11 2,
400,
000
Outstandingshares, 12/31/11 120,
000
Preferencedi
v i
dendsf orthey earended2011 30,
000

133. Whatisthepay
outr
ati
oforTur
nerCor
por
ati
onf
ort
hey
earended2011?
a.12.1%
b.16.0%
c. 36.
3%
d.41.3%

134. Whatisthebookv
aluepershar
eforTur
nerCor
por
ati
onf
ort
hey
earended2011?
a.$19.17
b.$20.00
c. $10.
43
d.$24.00
15-36 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

i
Uset
hef
oll
owi
ngi
nfor
mat
ionf
orquest
ions135t
hrough137.

Writ
ten,Inc.hasoutstandi
ng300,
000shar
esof$2parordinar
ysharesand60,
000sharesofno-
par8%pr ef
erenceshareswit
hast at
edval
ueof$5.Thepr ef
erenceshar
esarecumulat
iveand
nonpart
icipati
ng.Divi
dendshavebeenpaidinever
yy earexceptthepasttwoy ear
sandt he
curr
entyear .

*
135.Assumingt hat$150,
000willbedistr
ibut
edasadi
vi
dendi
nthecur
renty
ear
,how much
wil
ltheordinar
ysharehol
der
sr ecei
ve?
a.Zer o.
b.$78, 000.
c. $102,000.
d.$126, 000.

*
136.Assumingthat$63,
000wil
lbedistr
ibut
edasadi
vi
dendi
nthecur
renty
ear
,howmuchwi
l
l
thepref
erenceshar
ehol
der
sreceiv
e?
a.$21,000.
b.$24,000.
c. $48,
000.
d.$63,000.

*
137.Assuming that$183,
000 wil
lbe distr
ibut
ed,and the pr
efer
ence shar e al
es ar so
part
ici
pat
ing,howmuchwil
ltheor
dinar
ysharehol
der
srecei
ve?
a.$111,000.
b.$90,000.
c. $93,
000.
d.$48,000.

*
138.Yoder,Inc.has50,
000sharesof$10parv alueordi
naryshar
esand25,000sharesof$10
parvalue,6%,cumulati
ve,parti
cipati
ngprefer
encesharesoutst
andi
ng.Div
idendsont he
pref
erenceshar esareoney earinar r
ears.AssumingthatYoderwishestodistr
ibute
$135,000asdivi
dends,theordinaryshar
eholder
swill
recei
ve
a.$30, 000.
b.$55, 000.
c. $80,000.
d.$105, 000.

*
139.MannCo.hasout st
andi
ng50,000shar esof8%pr efer
enceshar eswit
ha$10parv alue
and125,000shar esof$3parv al
ueor di
nar yshar
es.Dividendshavebeenpaideveryyear
exceptlasty earand thecurrentyear .Ifthepr efer
enceshar esarecumulativ
eand
nonpart
icipat
ingand$250,000isdist
ri
but ed,t
heordinar
yshar ehol
der
swill
recei
ve
a.$0.
b.$170, 000.
c. $210,000.
d.$250, 000.
 Equi
ty 15-37

Mul
ti
pleChoi
ceAnswer
s—Comput
ati
onal
I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans.
80. a 89. d 98. a 107. b 116. a 125. c 134. b
81. b 90. b 99. c 108. d 117. a 126. a *135. b
82. b 91. d 100. c 109. d 118. d 127. c *136. d
83. c 92. d 101. a 110. a 119. d 128. c *
137. b
84. d 93. b 102. a 111. c 120. b 129. a *
138. c
85. b 94. c 103. c 112. a 121. d 130. b *
139. b
86. c 95. c 104. d 113. b 122. a 131. c
87. d 96. d 105. c 114. b 123. b 132. a
88. c 97. c 106. d 115. b 124. a 133. b

MULTI
PLECHOI
CE—CPAAdapt
ed
140. Acor porati
onwasor ganizedi nJanuar y2009withaut hori
zedcapit
alof$10parv al
ue
ordi
naryshar es.OnFebr uary1,2012,shar eswereissuedatparf orcash.OnMarch1,
2012,thecor por ati
on'
sat torneyaccept ed7,000ordinarysharesinsett
lementf
orlegal
serv
iceswi t
haf airval
ueof$90, 000.Sharepremi
um woul di
ncreaseon
February1, 2012 Mar ch1, 2012
a. Yes No
b. Yes Yes
c. No No
d. No Yes

141. OnJul y1,2012,NallCo.issued2,500sharesofits$10paror dinar

ysharesand5,000
sharesofi t
s$10parconv ert
ibl
eprefer
encesharesforalumpsum of$125, 000.Atthi
s
dateNall'sordi
nar
yshareswer esel
li
ngfor$24pershar eandtheconv er
ti
blepr
efer
ence
sharesf or$18pershare.Theamountoft heproceedsall
ocatedtoNal l
'
sprefer
ence
sharesshouldbe
a.$62, 500.
b.$75, 000.
c. $90,000.
d.$68, 750.

142. Hort
onCo.wasorgani
zedonJanuary2,2012,
with500,
000authori
zedsharesof$10par
val
ueor
dinar
yshar
es.Duri
ng2012,
Hortonhadthefol
lowi
ngcapit
altransact
ions:
Januar
y5—issued375,
000shar
esat$14pershar
e.
Jul
y27—purchased25,
000shar
esat$11pershar
e.
November25—sold15,
000shar
esoftr
easur
ysharesat$13pershar
e.
Hortonusedthecostmet
hodtorecor
dt hepurchaseoft
hetreasur
yshares.Whatwoul
d
bethebalancei
ntheShar
ePremi
um—Tr easur
yaccountatDecember31,2012?
a.$0.
b.$15,000.
c. $30,
000.
d.$45,000.
15-38 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

143. I
n2010,HobbsCor p.acquir
ed9,000$1parv al
ueordi
narysharesat$18pershare.In
2011,Hobbsissued4,000ofthesesharesat$25pershare.Hobbsusesthecostmethod
toaccountf
oritstr
easurysharestr
ansacti
ons.Whataccountsandwhatamountsshould
Hobbscredi
tin2011tor ecor
dtheissuanceofthe4,
000shares?
TreasuryShar
eRet ainedShare
Shares Premium Earni
ngs Capit
al
a. $72,000 $70,000
b. $72,000$28,
000
c. $96,000 $4,
000
d. $68,000$28,000 $4,000

144. Atitsdateofincorporati
on,Sauder
,Inc.issued100,000sharesofi t
s$10paror dinary
sharesat$11pershar e.Duri
ngthecurrentyear
,Sauderacquired20,
000ordinar
yshar es
atapr i
ceof$16pershar eandaccount edforthem bythecostmet hod.Subsequently
,
theseshareswerer eissuedatapr iceof$12pershar e.Therehav ebeennoot her
i
ssuancesoracquisit
ionsofitsownor dinar
yshares.Whateffectdoestherei
ssuanceof
theshareshav
eont hef ol
lowi
ngaccounts?
Ret
ainedEarni
ngs SharePr
emi um
a. Decrease Decr
ease
b. Noef f
ect Decr
ease
c. Decrease Noeffect
d. Noef f
ect Noeffect

145. FarmerCor p.owned20,000shar esofEat onCor p.pur chasedin2007f or$240,000.On

December15,2010,Farmerdecl ar edapr oper t
ydi videndofal lofi
tsEatonCorp.shares
ont hebasisofoneshar eofEat onf orever y10or dinarysharesofFar merheldbyi t
s
shareholder
s.The property di
vidend was di str
ibut ed on January 15,2011.On t he
declarat
iondate,t
heaggr egatemar ketpriceoft heEat onshar esheldbyFar merwas
$400,000.Theentrytorecordt hedecl arationoft hedi vi
dendwouldi ncl
udeadebi tto
RetainedEarni
ngsof
a.$0.
b.$160, 000.
c. $240,000.
d.$400, 000.

146. Acor por

ati
ondeclar
edadivi
dend,aport
ionofwhi
chwasl
i
qui
dat
ing.How woul
dthi
s
di
str
ibuti
onaff
ecteachoft
hefol
lowi
ng?
Share
Premium Ret
ainedEarni
ngs
a. Decrease Noef f
ect
b. Decrease Decrease
c. Noef f
ect Decr
ease
d. Noef f
ect Noeffect
 Equi
ty 15-39

147. OnMay1,2012,Zi ekCor p.decl ar

edandi ssueda10%ordi
narysharesdi
vidend.Pri
orto
thi
sdividend,Ziekhad100, 000ordinarysharesof$1parval
ueissuedandout st
anding.
ThefairvalueofZiek'sor dinar
yshar eswas$20pershareonMay1, 2012.Asar esul
tof
thi
sshar ediv
idend,Zi
ek'st otal
equity
a.increasedby$200, 000.
b.decr easedby$200, 000.
c. decreasedby$10,000.
d.didnotchange.

148. How woul dt hedecl

arat
ionandsubsequentissuanceofa10% sharedivi
dendbythe
i
ssueraffecteachofthefol
lowi
ngwhent hef
airval
ueoftheshar
esexceedst
heparval
ue
oft
heshar es?
Share
ShareCapi t
al Premium
a. Noef fect Noeffect
b. Noef fect I
ncrease
c. I ncrease Noeffect
d. I ncrease I
ncrease

149. OnDecember31,
2010,
theequi
tysect
ionofAr
ndt
,Inc.
,wasasf
oll
ows:
Sharecapital—ordinary,
parv
alue$10;aut
hor
ized30,
000shar
es;
issuedandout standi
ng9,
000shares $90,000
Sharepremi um—or dinary 116,
000
Retainedearnings 174,
000
Totalequit
y $380,
000
OnMar ch31,2011,Ar
ndtdeclareda10%sharedivi
dend,andaccordi
ngly900addi
t i
onal
shareswer ei
ssued,whenthef airv
aluewas$18pershare.Forthethr
eemont hsended
Mar ch31,2011,Arndtsust
ainedanetl ossof$32,
000.ThebalanceofArndt’
sretained
earningsasofMarch31,2011,shouldbe
a.$125, 800.
b.$133, 000.
c. $134,800.
d.$142, 000.

*
150.AtDecember31,2010and2011,Pl ankCorp.hadoutstandi
ng2,000sharesof$100par
value8% cumul at
ivepreferencesharesand10, 000sharesof$10parv al
ueordi
nary
shares.AtDecember31, 2010,di
vi
dendsinarrearsonthepref
erenceshar
eswere$8,
000.
Cashdi vi
dendsdeclar
edi n2011t otal
ed$30,000.Whatamount swerepayabl
eoneach
classofstock?
Pr
efer
enceShar
esOr
dinar
yShares
a. $16,000 $14,
000
b. $22,000 $8,
000
c. $24,000 $6,
000
d. $30,000 $0

Mul
ti
pleChoi
ceAnswer
s—CPAAdapt
ed
I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans. I
tem Ans.
140. d 142. c 144. c 146. b 148. d *
150. c
15-40 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

141. b 143. b 145. d 147. d 149. a

DERI
VATI
ONS—Comput
ati
onal
No.Answer Der
ivat
ion
80. a $4,
300,000+$400,
000+$550,
000+$2,
000,
000+$1,
500,
000–$150,
000
=$8,600,
000.

81. b $4,
300,
000+$550,
000=$4,
850,
000.

82. b (
10,
000$25)+(15,
000$20)=$550,
000
(
$250,
000÷$550,
000)$480,
000=$218,
182.

83. c (
4,000$25)+(6,
000$20)=$220,
000
(
$120,000÷$220,
000)$192,
000=$104,
727.

84. d (
5,000$18)+$100,
000=$190,
000.

85. b [
(
6,000$25)÷[
(
6,
000$25)+(
9, ]
000$20)]$288,
000=$130,
909.

86. c [
(
7,500$20)÷[
(
5,
000$25)+(
7, ]
500$20)]$240,
000=$130,
909.

87. d (
1,000€36)+(
1,000€28)=€64,
000
[
(€36,
000÷€64, 000]
000)€60, –€5,
000=€28,
750.

88. c (
1,000€36)+(1,000€28)=€64,
000
(
€28,000÷€64,
000)€60,
000=€26,
250.

89. d (
€15–€5)1,
000=€10,
000.

90. b (
₤28–₤24)500=₤2,
000.

91. d (
$60–$52)20,
000=$160,
000.

92. d 12,
000$15=$180,
000.

93. b 3,
000$20=$60,
000;
3,000$7=$21,
000.

94. c 4,
000$15=$60,
000;
4,000$4=$16,
000.

95. c $900,
000+(
2,000$5)–(
500$10)=$905,
000.

96. d (
675,
000$4)+(
90,
000$7)=$3,
330,
000.

97. c $900,
000+(
3,600$5)–(
2,400$4)=$908,
400.

98. a $1,
650,
000–(3,
000$28)–(
3,000$35)+(
1,800$30)+$450,
000=
$1,
965,
000.
 Equi
ty 15-41

99. c 20,
000$55=$1,
100,
000.

100. c 2,000$50.06=$6,000
($6,000–$5,
000)+$6,
000=$7,
000.

101. a 5,000$100.
05=$25,000
($45,
0002)–($25,
0003)=$15,
000.

102. a 6,
000$100. 07=$42,
000
$160,
000–($42,0002)=$76,
000.

103. c 10,
000₤10=₤100,
000.

104. b (
10,
000₤12)–(
10,
0004₤1)=₤80,
000.

105. c ($90,
000÷$10)$14=$126, 000
[$14–($90,
000÷10, ]
000)9,000=$45,000
$126,
000–$45,000=$81,000.

106. d ($270,000÷$10)$14=$378, 000

[$14–($270,
000÷30, ]
000)27,000=$135,000
$378,000–$135,000=$243,000.

107. b (
900,
000$7)–[
($7–$5)900,
000]=$4,
500,
000.

108. d (180,
000÷10)$14=$252,000
$252,
000–[$252,
000–(180,00018/
20)
]=$162,
000.

109. d (5,
000$63)=$315,
000
$315,
000–($315,
000–$218,
000)=$218,
000.

110. a 350,
000.10×$30=$1,
050,
000
$1,
050,
000+(350,
0001.
10$.50)=$1,
242,
500.

111. c (
60,
000$50)+$3,
000,
000=$6,
000,
000.

112. a $75,
000–$10,
000–(
1,500$6)=$56,
000.

113. b 160,
000.
15$35=$840,
000.

114. b 120,
000.
10$20=$240,
000.

115. b 100,
000.
10$8=$80,
000.

116. a $200,
000+$100,
000–$60,
000–(
3,000$20)=$180,
000.

117. a (
$420,
000.
05$36)+(
$420,
0001.
05$.
60)=$1,
020,
600.
15-42 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

118. d $150,
000+$75,
000–$45,
000–(
1,500$30)=$135,
000.

119. d (
560,
000.
05$48)+(
560,
0001.
05$.
60)=$1,
696,
800.

120. b (
₤85–₤10)(
10,
000.
10)=₤75,
000.

121. d Noe
ntr
yre
qui
r
ed.

122. a €2,
000,
000÷200,
000=€10/
sha
re.

123. b (
€620,
000–€210,
000)÷€200,
000=21%.

124. a €210,
000÷(
€620,
000–€100,
000)=40%.

125. c $8,
000÷(
$93,
000–$15,
000)=10.
3%.

126. a $1,
800,
000÷150,
000=$12.
00.

127. c (
$72, 000)÷[
000–$10, (
$1,
000,
000+$1,
200, ]
000)=5.
6%.

128. c ($72,
000–$10,000)÷100,
000=$.
62.
$12÷.62=19.
4.

X
129. a ———————————=.
25,
X=$430,
000.
($2,
120,
000–$400,
000)

130. b =.
107=10.
7%.

131. c

=$80÷400.

$120,
000+$80,
000+(240,
000–$10,
000)
132. a ———————————————————=$430÷12.
12,
000

133. b $15,
000÷(
$124,
000–$30,
000)=16.
0%.

134. b $2,
400,
000÷120,
000=$20.
00.

*
135. b $150,
000–(
60,
000$5.
083)=$78,
000.

*
136. d 60,
000$5.
083=$72,
000>$63,
000.
 Equi
ty 15-43

*
137. b 8%$600,
000= $48,
000 (
cur
rentyear)
7%*$600,000= 42,
000 (
par
ti
cipati
ng)
$90,000
15-44 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

*$300,0008%3= $72,
000(
pref
erencedi
vidends)
$600,0008%= 48,
000(
ordi
narycur
rentdivi
dends)
$120,
000
$183,000–$120,000
——————————=7%.
$600,000+$300,000

*
138. c Ordi
nar
yShar
es
$500,0006% =$30,
000(
curr
entyear)
$500,00010%* = 50,
000(
part
ici
pati
ng)
$80,
000
*$135,000–$30,
000–(
$250,
0006%×2)=$75,000

$75,
000
————=10%.
$750,
000

*
139. b $250,
000–(
$500,
0008%×2)=$170,
000.

DERI
VATI
ONS—CPAAdapt
ed
No.Answer Der
ivat
ion
140. d Concept
ual
.

141. b (
$242,
500)+(
$185,
000)=$150,
000.

$90,
000
—————×$125,
000=$75,
000.
$150,
000

142. c 15,
000$2=$30,
000.

143. b (
4,000$18)=$72,
000;
(4,
000$7)=$28,
000.

144. c Concept
ual
.

145. d $400,
000(
fai
rval
ue)
.

146. b Concept
ual
.

147. d Concept
ual
.

148. d Concept
ual
.

149. a $174,
000–$32,
000–(
900$18)=$125,
800.

*
150. c (
$200,
000.
08)+$8,
000=$24,
000
 Equi
ty 15-45

$30,
000–$24,
000=$6,
000.
15-46 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

EXERCI
SES
Ex.15-
151—Lumpsum i
ssuanceofshar
es.
ParkerCorpor
ati
onhasi
ssued2,
000or
dinar
yshar
esand400pr
efer
enceshar
esf
oral
umpsum
of$72,000cash.

I
nst
ructi
ons
(
a)Givetheentryfort
heissuanceassumi ngt
heparv al
ueoftheor
dinaryshar
eswas$5andt he
fai
rv al
ue$30,andt heparv al
ueoft hepref
erenceshareswas$40andt hefairval
ue$50.
(Eachvaluat
ionisonapersharebasisandtherearereadymar
ketsforeachclassofshar
es.)

(
b)Givetheentr
yforthei
ssuanceassumi
ngthesamefact
sas(a)aboveexceptt
heprefer
ence
shareshavenoreadymarketandt
heor
dinar
yshar
eshaveaf
airval
ueof$25pershar
e.

Sol
uti
on15-
151
(
a) Cash 72,
000
ShareCapit
al—Ordi
nary 10,
000
SharePremium—Or di
nary 44,
000
ShareCapit
al—Pref
erence 16,
000
SharePremium—Pr ef
erence 2,
000
(ordinary$30×2,000 $60,
000
preference$50×400 20,
000
$80,
000fai
rval
ue
60/
80×$72,
000= $54,
000ordi
nary
20/
80×$72,
000= 18,
000pref
erence
$72,
000)

(
b) Cash 72,
000
Shar
eCapit
al—Or
dinary 10,
000
Shar
ePremium—Ordinary 40,
000
Shar
eCapit
al—Pr
eference 16,
000
Shar
ePremium—Preference 6,
000
 Equi
ty 15-47

Ex.15-
152—Tr
easur
yshar
es.
Fornumer ousr easons,acorporat
ionmayr eacqui
reshar
esofitsownshares.Whenacompany
purchasestreasuryshares,
itusual
lyaccountsfort
hesharesusi
ngthecostmethod.

I
nstr
uct i
ons
Expl
ainhowacompanywoul daccountforeachofthefoll
owing:
1.Pur chaseofsharesatapr i
celessthanparval
ue.
2.Subsequentr esal
eoftreasurysharesatapr i
celesst hanpurchasepr
ice,butmoret
hanpar
v
alue.
3.Subsequentr esaleoftreasurysharesatapr i
cegr eaterthanbothpurchasepri
ceandpar
v
alue.
4.Effectonnetincome.

Sol
uti
on15-
152
1.Tr
easur
ySharesi
sdebit
edfort
hepur
chasepr
iceoft
heshar
esev
ent
hought
hepur
chase
pr
icei
slesst
hanparval
ue.

2.Treasur
ySharesiscr edi
tedfortheorigi
nalcost(pur
chasepri
ce)oftheshar
es,andt he
excessoftheor i
ginalcost(purchasepri
ce)overthesalespri
cefi
rsti
sdebit
edt oShare
Premium—Treasuryfrom earl
i
ersalesoftr
easur
ysharesandanyremai
ndert
henisdebi
tedto
Retai
nedEarni
ngs.

3.Treasur
ysharesiscreditedfortheor i
ginalcost(pur
chasepr i
ce)oftheshares,andt he
excess oft
he sales pr
ice overthe ori
ginalcost(purchase pr
ice)i
s cr
edi
ted to Share
Premium—Treasur
y.

4.Ther
eisnoef
fectonneti
ncomeasar
esul
toft
reasur
yshar
etr
ansact
ions.

Ex.15-
153—Tr
easur
yshar
es.
Agl
erCorporati
on'
sst atementoffi
nanci
alposi
ti
onreport
edthef
oll
owing:
Sharecapit
al—or di
naryout
standi
ng,5,
000shares,
par$30pershar
e $150,
000
sharepremium—or di
nar
y 80,
000
Retai
nedear ni
ngs 100,
000

Thefoll
owingtr
ansactionsoccur r
edthisyear
:
(a) Pur
chased120or dinarysharesoftobeheldastreasur
yshar
es,
pay
ing$60pershar
e.
(b) Sol
d90oft hetr
easur ysharesat$65pershare.
(c) Sol
dtheremaini
ngt reasurysharesat$50pershare.

Inst
ructi
ons
Preparethej
our
nalent
ryf
ort
heset
ransact
ionsundert
hecostmet
hodofaccount
ingf
ort
reasur
y
shares.
15-48 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

Sol
uti
on15-
153
(
a)Tr
easuryShar
es 7,
200
Cash 7,
200

(
b)Cash 5,
850
Treasur
yShar
es 5,
400
SharePremi
um—Tr
easur
y 450

(
c)Cash 1,
500
Shar
ePremium—Treasur
y 300
Tr
easuryShar
es 1,
800

Ex.15-
154—Tr
easur
yshar
es.
El
l
isonCompany '
sstatementoffi
nanci
alposi
ti
onshows:
Sharecapit
al—ordi
nary,
$20par $3,
000,
000
Sharepremium—or di
nary 1,
050,
000
Retai
nedearnings 750,
000
I
nstruct
ions
Recordthefol
l
owingtr
ansacti
onsbyt hecostmethod.
(a) Bought5,
000ordi
nar
yshar esat$29ashare.
(b) Sol
d2,500tr
easur
ysharesat$30ashar e.
(c) Sol
d1,000shar
esoftreasurysharesat$26ashare.

Sol
uti
on15-
154
(
a) Tr
easur
yShares 145,
000
Cash 145,
000

(
b) Cash 75,
000
Treasur
yShar
es 72,
500
SharePremi
um—Tr
easur
y 2,
500

(
c) Cash 26,
000
SharePremium—Tr easury 2,
500
Retai
nedEar ni
ngs 500
TreasuryShares 29,
000
 Equi
ty 15-49

Ex.15-
155—Tr
easur
yshar
es.
In2010,Mordi
caCo.i
ssued200,000ofi t
s500,
000authori
zedsharesof$10parval
ueordinary
shar
esat$35pershar
e.InJanuary,2011,Mor
dicar
epurchased15,000shar
esat$30pershare.
Assumethesearet
heonlyshar
etransacti
onst
hecompanyhasev erhad.
I
nst
ruct i
ons
(
a) Whatar ethetwomet hodsofaccount i
ngfort
reasur
yshares?
(
b) Preparethejournal
entrytorecordthepur
chaseoftreasurysharesbythecostmet
hod.
(
c) 5,000t r
easuryshar
esar ereissuedat$33pershare.Preparethejour
nalentr
ytorecor
dthe
reissuancebythecostmet hod.

Sol
uti
on15-
155
(
a) Thetwomet
hodsofaccount
ingf
ort
reasur
yshar
esar
ethecostmet
hodandt
heparv
alue
method.

(
b) Tr
easur
yShares 450,
000
Cash 450,
000

(
c) Cash 165,
000
SharePremi
um—Tr
easur
y 15,
000
Treasur
yShar
es 150,
000

Ex.15-
156—Equi
tyt
ransact
ions.
Indi
catetheeff
ectofeachoft
hef
oll
owi
ngt
ransact
ionsontot
alequi
tybypl
aci
ngan"X"int
he
appropri
atecol
umn.
I
ncrease Decr
ease NoEf
fect

1.Tr
easur
yshar
esar
eresol
datmor
ethancost
.

2.Oper
ati
ngl
ossf
ort
heper
iod.

3.Reti
rementofbondspay
abl
eatmor
ethan
bookval
ue.

4.Decl
arat
ionofashar
edi
vi
dend.

5.Acqui
sit
ionofmachi
ner
yforor
dinar
yshar
es.

6.Conver
sionofbondspay
abl
eint
oor
dinar
y
shar
es.

7.Notdecl
ari
ngadiv
idendoncumul
ati
ve
pr
efer
enceshar
es.

8.Decl
arat
ionofcashdi
vi
dend.

9.Pay
mentofcashdi
vi
dend.
15-50 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

Sol
uti
on15-
156
I
ncr
ease Decr
ease NoEf
fect

1.Tr
easur
yshar
esar
eresol
datmor
ethancost
. X

2.Oper
ati
ngl
ossf
ort
heper
iod. X

3.Reti
rementofbondspay
abl
eatmor
ethan
bookval
ue. X

4.Decl
arat
ionofashar
edi
vi
dend. X

5.Acqui
sit
ionofmachi
ner
yforor
dinar
yshar
es. X

6.Conver
sionofbondspay
abl
eint
oor
dinar
y
shar
es. X

7.Notdecl
ari
ngadiv
idendoncumul
ati
ve
pr
efer
enceshar
es. X

8.Decl
arat
ionofcashdi
vi
dend. X

9.Pay
mentofcashdi
vi
dend. X

Ex.15-
157—Shar
edi
vi
dends.
Descr
ibet
hej
our
nal
ent
ryf
orashar
edi
vi
dendonor
dinar
yshar
es(
whi
chhasaparv
alue)
.

Sol
uti
on15-
157
A sharedi vi
dendr esultsint hetransf
erf r
om retai
nedear ningst ocont r
ibutedcapi t
alofan
amountequalt ot hefairvalueofeachshar e,i
fthedivi
dendisl esst han20-25%,orparv al
ueof
eachshar e,ift hedividendi sgreaterthan20-25%.RetainedEar ni
ngsi sdebitedfort hetotal
amountt r
ansf erred,Ordinar
yShareDi vi
dendDistr
ibut
ablei
scr editedf ort
hetotalparv al
ueofthe
shares,
and, forasmal lsharedivi
dend,theexcessoffai
rvalueov erparv al
ueiscr edi
tedtoShare
Premium—Or di nary.
 Equi
ty 15-51

Ex.15-
158—Shar
edi
vi
dendsandshar
espl
i
ts.
Indi
cat
ethepr i
nci
palef
fect
sofasharedivi
dendversusasharespli
tastheyaff
ectt
hei
ssui
ng
corpor
ati
on.Respondi
nthespacesasf
oll
ows:"C"f
orchange;
"NC"fornochange.
Shar
eDi
vi
dend Shar
eSpl
i
t
NumberofShar
esOut
standi
ng
ParVal
ueperShar
e
Tot
alParOut
standi
ng
Ret
ainedEar
nings
Tot
alEqui
ty
Composi
ti
onofEqui
ty

Sol
uti
on15-
158
Shar
eDivi
dend Shar
eSpl
i
t
NumberofShar esOutst
andi
ng C C
ParValueperShar e NC C
TotalParOutstandi
ng C NC
Retai
nedEar ni
ngs C NC
TotalEqui
ty NC NC
Composi t
ionofEquity C NC

Ex.15-
159—Comput
ati
onofsel
ect
edf
inanci
alr
ati
os.
Thef
oll
owi
ngi
nfor
mat
ionper
tai
nst
oPar
sonsCo.
:
Preferenceshar es,cumul at
ive:
Parpershar e $100
Di vi
dendr ate 8%
Shar esout standi
ng 5,
000
Di vi
dendsi nar r
ears none
Ordinaryshar es:
Parpershar e $10
Shar esissued 60,
000
Di vi
dendspai dpershare $2.
70
Mar ketpr i
cepershar e $48.
00
Sharepr emium—or dinary $200,
000
Unappr opri
atedr etai
nedear nings(af
tercl
osing) $135,
000
Retainedear ningsappr opri
atedforconti
ngencies $150,
000
Ordinarytreasuryshar es:
Numberofshar es 5,
000
Tot alcost $125,
000
Netincome $370,
000
15-52 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on
 Equi
ty 15-53

I
nstr
ucti
ons
Compute(assumenochangesi nbalancesduri
ngthepastyear):
(a) Totalamountofequit
yinthestatementoffi
nanci
alposit
ion
(b) Ear
ningspershare
(c) Bookv al
ueperordi
naryshare
(d) Payoutrati
o
(e) Retur
nonor di
naryshareequi
ty

Sol
uti
on15-
159
(
a) (
5,000×$100)+(
60,
000×$10)+$200,
000+$135,
000+$150,
000–$125,
000
=$1,460,
000.

(
b) [
$370,
000–(5,000×$100×8%)
]÷(
60,
000–5,
000)=330,
000÷55,
000
=$6.
00pershare.

(
c) (
$1,
460,
000–$500,
000)÷(
60,
000–5,
000)=$960,
000÷55,
000=$17.
45pershar
e.

(
d) $2.
70÷$6=45%or[
($2.
70×55,
000)÷(
$370,
000–$40,
000)
].

(
e) (
$370,
000–$40,
000)÷(
$1,
460,
000–$500,
000)=34.
4%.

*
Ex.15-
160—Di
vi
dendsonpr
efer
enceshar
es.
Theequi
tysect
ionofLemayCor
por
ati
onshowst
hef
oll
owi
ngonDecember31,
2011:
Sharecapi
tal—pref
erence—6%,$100par,
4,000shar
esoutstandi
ng $ 400,
000
Sharecapi
tal—ordi
nary—$10par,60,
000sharesout
standi
ng 600,
000
Sharepremium—or di
nary 200,
000
Retai
nedearnings 114,
000
Totalequi
ty $1,
314,
000

Inst
ructions
Assumi ngthatallofthecompany '
sretai
nedearningsaretobepaidoutindiv
idendson12/ 31/11
andt hatpreferencedivi
dendswerel astpai
don12/ 31/
09,show how mucht hepref
erenceand
ordi
naryshar eholder
sshouldrecei
veifthepref
erencesharearecumulat
iveandfull
yparti
cipat
ing.

*
Sol
uti
on15-
160
Pref
erence Or di
nary Tot
al
Di
vi
dendsi narr
ears(6%of$400,000) $24,
000$ — $24, 000
Cur
renty ear'
sdivi
dends 24,
00036,00060,
000
Par
ti
cipatingdivi
dend( 3%)
[
($30,000÷$1, 000,000)x$400,
000] 12,
000 18,
000 30,000
$60,
000$54,
000$114,
000
15-54 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

*
Ex.15-
161—Di
vi
dendsonpr
efer
enceshar
es.
I
neachoft hefol
lowingindependentcases,i
tisassumedthatthecorpor
ati
onhas$400,
000of
6%pref
erencesharesand$1, 600,
000ofordinar
ysharesout
standi
ng,eachhavi
ngaparval
ueof
$10.Nodivi
dendshav ebeendeclaredf
or2009and2010.

(
a)Asof12/31/
11, i
tisdesir
edt odi
str
ibut
e$250,000i
ndivi
dends.Howmuchwi
l
lthepr
efer
ence
shar
ehol
dersrecei
v ei
ftheirshar
esarecumulati
veandnonpar
tici
pat
ing?

(
b)Asof12/31/
11, i
tisdesir
edt odi
str
ibut
e$400,000i
ndivi
dends.Howmuchwil
lthepref
erence
shar
ehol
dersrecei
v ei
ftheirshar
esarecumulati
veandpart
ici
pat
ingupt
o11%intotal
?

(
c)On12/31/11,t
hepr
eferenceshareholder
srecei
veda$120,
000di
vi
dendontheirshareswhich
arecumul
ativ
eandfull
yparti
cipati
ng.Howmuchmoneywasdi st
ri
butedi
ntotalfordivi
dends
duri
ng2011?

*
Sol
uti
on15-
161
(
a) $72,
000($400,
000x.06x3y rs.
).
(
b) $92,
000($400,
000x.06x3y rs.
)+[$400,
000x(
.11-.
06)]
.
(
c) $408,
000($288,
000*toor
dinaryand$120,
000t
oprefer
ence)
.

*(
$1,
600,
000x.
06)+[
($120,
000-$72,
000)÷$400,
000)x$1,
600,
000]
.

PROBLEMS
Pr
.15-
162—Equi
tyt
ransact
ions.
Pr
esent
edbel
owi
sinf
ormat
ionr
elat
edt
oWy
rickCompany
:
1.Thecompanyisgrant
edachart
ert
hatauthor
izesissuanceof15,000shar
esof$100par
val
uepref
erenceshar
esand40,
000sharesofno-parordinar
yshares.
2.8,
000or di
narysharesar
eissuedtot
hefoundersofthecor
porat
ionforl
andv
aluedbyt
he
boardofdir
ectorsat$300,
000.Theboar
destabli
shesastat
edvalueof$5asharef
ort
he
ordi
naryshares.
3.5,
000pr
efer
enceshar
esar
esol
dforcashat$120pershar
e.
4.Thecompanyissues100ordi
naryshar
estoit
satt
orneysforcost
sassociat
edwi
thst
art
ing
thecompany
.Atthatt
ime,
theordi
naryshar
eswer
esell
ingat$60pershar
e.

I
nstr
ucti
ons
Pr
eparethegener
alj
our
nal
ent
ri
esnecessar
ytor
ecor
dtheset
ransact
ions.

Sol
uti
on15-
162
1.Noent
rynecessar
y.

2.Land 300,
000
Shar
eCapit
al—Or
dinary 40,
000
Shar
ePremium—Ordinar
y 260,
000
Equi
ty 15-55
15-56 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

3.Cash 600,
000
Shar
eCapi
tal
—Pr
efer
ence 500,
000
Shar
epr
emium—Pref
erence 100,
000

4.Or
gani
zati
onExpense 6,
000
ShareCapit
al—Or
dinary 500
SharePremium—Ordinar
y 5,
500

Pr.15-
163—Treasur
ysharetransacti
ons.
Theori
ginal
saleofthe$50parv al
ueor di
nar
yshar
esofGr
ayCompanywasrecor
dedasf
oll
ows:
Cash 290,
000
ShareCapit
al—Or di
nary 250,
000
SharePremium—Or dinar
y 40,
000

I
nstruct
ions
Recordthetr
easur
yshar
etr
ansact
ions(
giv
enbel
ow)undert
hecostmet
hod:

Transact
ions:
(a) Bought300or di
narysharesastr
easur
yshar
esat$62.
(b) Sold80sharesoft r
easuryshar
esat$60.
(c) Sold40t r
easurysharesat$68.

Sol
uti
on15-
163
(
a) Tr
easuryShar
es 18,
600
Cash 18,
600

(
b) Cash 4,
800
Retai
nedEarni
ngs 160
Treasur
yShares 4,
960

(
c) Cash 2,
720
SharePremi
um—Tr
easur
y 240
Treasur
yShar
es 2,
480

Pr
.15-
164—Shar
edi
vi
dends.
TheequitysectionofBent onCor
por
ation'
sstat
ementoff i
nanci
alposit
ionasofDecember31,
2010i
sasf ol
lows:
Equi
ty
Sharecapital—ordi
nary,
$5parv
alue;aut
hori
zed,
2,000,
000shares;
issued,400,000shares $2,
000,
000
Sharepremi um—or di
nary 850,
000
Retainedearnings 3,
000,
000
$5,
850,
000
 Equi
ty 15-57

Thef
oll
owi
ngev
ent
soccur
reddur
ing2011:

1.Jan.5 10,
000shar
esofaut
hor
izedanduni
ssuedor
dinar
yshar
eswer
esol
dfor$8per
shar
e.

2.Jan.16 Decl
aredacashdi
vi
dendof20cent
spershar
e,pay
abl
eFebr
uar
y15t
oshar
e-
hol
dersofr
ecor
donFebr
uar
y5.

3.Feb.10 20,
000shar
esofaut
hor
izedanduni
ssuedor
dinar
yshar
eswer
esol
dfor$12per
shar
e.

4.Mar
ch1 A30% shar
edi
vi
dendwasdecl
aredandi
ssued.Fai
rval
uepershar
eiscur
rent
ly
$15.

5.Apr
il1 Atwo-f
or-
onespl
itwascar
riedout
.Theparval
ueoftheshareswast
ober
educed
t
o$2.50pershar
e.Fai
rval
ueonMar ch31was$18pershare.

6.Jul
y1 A15% shar
edi
vi
dendwasdecl
aredandi
ssued.Fai
rval
uei
scur
rent
ly$10per
shar
e.

7.Aug.1 A cashdi
vi
dendof20centspersharewasdecl
ared,pay
abl
eSept
ember1t
o
st
ockhol
der
sofrecor
donAugust21.

I
nstr
ucti
ons
Ent
ertheabov
eev
ent
sint
othef
oll
owi
ngwor
ksheetshowi
nghoweachev
entaf
fect
sthecol
umn.
15-58 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

Ev
entNo.1wi
l
lser
veasanexampl
e.
ShareCapi t
al—Ordinary
No.of Total SharePremi um—
Item SharesIssued ParVal ue Ordi
nar y Ret
ainedEar
nings
BeginningBal
ance—1/
1/11 400,
000$2, 000,000$850,000$3,000,000
Event#1—Jan.5 10,
000 50, 000 30, 000 -0-
Balance 410,
000$2, 050,000$880,000$3,000,000

Ev
ent#2—Jan.16(
andev
ent
s3t
hrough7)
 Equi
ty 15-59

Sol
uti
on15-
164
Event#2—Jan.16 -0--0- -
0-(
82,
000)
———————————————————————————————————————————
Balance 410,000$2,050,
000$880,
000 $2,918,000
#3—Feb.10 20,000100,000140,
000 -0-
———————————————————————————————————————————
Balance 430,000$2,150,
000$1,
020,
000 $2,918,000
#4—Mar ch1 129,000645,000 -
0-(
645,
000)
———————————————————————————————————————————
Balance 559,000$2,795,
000$1,
020,
000 $2,273,000
#5—Apr i
l1 559,000-0- -
0--
0-
———————————————————————————————————————————
Balance 1,
118,000$2,795,
000$1,
020,
000 $2,273,000
#6—July1 167,700419,2501,
257,
750 (
1,677,000)
———————————————————————————————————————————
Balance 1,
285,700$3,214,
250$2,
277,
750 $596, 000
#7—Aug.1 -0--0- -
0-(
257,
140)
———————————————————————————————————————————
Balance 1,
285,700$3,214,
250$2,
277,
750 $338, 860
15-60 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

Pr
.15-
165—Equi
tyt
ransact
ions.
Fol
eyCor
por
ati
onhast
hef
oll
owi
ngcapi
tal
str
uct
ureatt
hebegi
nni
ngoft
hey
ear
:

Sharecapi
tal—preference6%,$50parv al
ue,
20,
000shar
esauthor
ized,
6,000sharesissuedandout standing $ 300,
000
Sharecapi
tal—ordinary,$10parvalue,60,
000shar
esaut
hor
ized,
40,000sharesissuedandout standing 400,
000
Sharepremium—or dinary 110,
000
Retai
nedearnings 440,
000
Totalequi
ty $1,
250,
000

I
nst
ruct
ions
(
a)Recordthef
oll
owi
ngt
ransact
ionswhi
choccur
redconsecut
ivel
y(showal
lcal
cul
ati
ons)
.
1.Atotalcashdi v
idendof$90,
000wasdecl
aredandpayabl
etosharehol
der
sofrecor
d.
Recorddi
videndspayabl
eonordi
nar
yandpr
efer
enceshar
esi
nsepar
ateaccount
s.
2.A10%or
dinaryshar
edi
vi
dendwasdecl
ared.Theav
eragef
airv
alueoft
heor
dinar
yshar
es
i
s$18ashare.
3.Assumet
hatneti
ncomef
ort
hey
earwas$150,
000(
recor
dthecl
osi
ngent
ry)andt
he
 Equi
ty 15-61

boar
dofdi
rect
orsappr
opr
iat
ed$70,
000ofr
etai
nedear
ningsf
orpl
antexpansi
on.

(
b)Const
ructt
heequi
tysect
ioni
ncor
por
ati
ngal
ltheabov
einf
ormat
ion.

Sol
uti
on15-
165
(
a)1.Ret
ainedEar
nings 90,
000
Di
vi
dendsPay
abl
e—Pr
eference(
$300,
000×.
06) 18,
000
Di
vi
dendsPay
abl
e—Or
dinary 72,
000

2. 40,
000shares
10%
4,
000sharesassharedi
vi
dend
$18
$72,
000tot
al di
vi
dend

Ret
ainedEarni
ngs 72,
000
Ordi
nar
yShareDi
vi
dendDist
ri
but
abl
e 40,
000
Shar
ePremium—Ordi
nar
y 32,
000

3.I
ncomeSummar y 150,
000
Ret
ainedEar
nings 150,
000

Ret
ainedEarnings 70,
000
Ret
ainedEarni
ngsAppr
opr
iat
edf
orPl
antExpansi
on 70,
000
15-62 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

Sol
uti
on15-
165(
cont
.)
(
b)Equity
6%Pr eferenceshar es,$50parv al
ue,20,
000sharesauthori
zed,
6, 000shar esissuedandout st andi
ng $ 300,
000
Sharecapi tal—ordinary,$10parv alue,60,
000sharesauthori
zed,
40, 000shar esissuedandout standing 400,
000
Ordinar yshar edividenddi str
ibutable 40,
000
Sharepr emi um—or dinary 142,
000
Retainedear nings—unappr opri
ated* $358,
000
Appr opriatedf orplantexpansi on 70,
000
Tot al retai
nedear nings 428,
000
Tot al equity $1,
310,
000
*
$440,
000–$90,
000–$72,
000+$150,
000–$70,
000=$358,
000

*
Pr.15-
166—Di
vi
dendsonpr
efer
enceandor
dinar
yshar
es.
Rensing,Inc.
,has $800,
000 of8% pref
erence shares and $1,200,
000 ofordi
nary shar
es
outst
anding,eachhav
ingaparval
ueof$10pershar e.Nodividendshavebeenpaidordeclar
ed
duri
ng2009and2010.AsofDecember31,2011,i
tisdesiredtodistr
ibut
e$488,
000indi
vidends.

Inst
ruct
ions
How muchwi l
lthepref
erenceandor di
naryshar eholdersrecei
veundereachoft
hef
oll
owi
ng
assumptions:
(a) Theprefer
encei
snoncumul at
iveandnonpar t
ici
pating.
(b) Theprefer
encei
scumul at
iveandnonpar t
icipati
ng.
(c) Theprefer
encei
scumul at
iveandful
lyparticipati
ng.
(d) Theprefer
encei
scumul at
iveandparti
cipatingto12%t ot
al.

*
Sol
uti
on15-
166
(
a) Pr
efer
enceOrdi
nary Total
Cur
rentyear
'sdi
vi
dend(8%of$800,
000) $64,000$ — $64, 000
Remaindert
oordi
nary 424,
000424,000
$64,000$424,
000$488,000

(
b) Pr
eferenceOrdi
nary Total
Div
idendsinarr
ears,
8%of$800,
000f
ort
woy
ear
s $128, 000$ — $128,000
Curr
entyear'
sdivi
dend 64,000 — 64,000
Remaindertoordi
nary 296,
000 296,000
$192,000$296,
000$488,000

(
c) Pr
eferenceOrdinary Tot al
Div
idendsinarr
ears,
8%of$800,000fort
woyears $128,000$ — $128,000
Curr
entyear'
sdivi
dend 64,00096,000160,000
Part
ici
pati
ngdivi
dend10%($200,000÷$2,
000,
000) 80, 000 120,000 200,000
$272,000$216,000$488, 000
Equi
ty 15-63
15-64 TestBankf
orI
nter
medi
ateAccount
ing,
IFRSEdi
ti
on

*
Solut
ion15- 166( cont .
)
(d) Pr
eferenceOrdinary Tot al
Divi
dendsi narr
ear s,8%of$800,
000f
ort
woy
ear
s $128, 000$ — $128,000
Currenty ear'
sdividend 64,00096,000160,000
Part
icipatingdividend(4%) 32,00048,00080,
000
Remai ndert oordinary — 120,000 120,000
$224,000$264,000$488, 000
 Equi
ty 15-65

Shor
tAnswer

1.Brief
lydescri
besomeoft hesimilar
it
iesanddiff
erencesbet
weenU.
S.GAAPandI
FRSwi
th
respecttotheaccount
ingforstockholder
s’equi
ty.

1.Keysimi lari
tiesbetweenI FRSandU. S.GAAPf ort r
ansacti
onsrelatedtostockholder
s’
equitypertainto( 1)i
ssuanceofshar es,(2)purchaseoft r
easuryshares,(3)decl
arati
onand
paymentofdi vidends,(
4)theaccount i
ngf orst
ar tupcosts—thatis,t
heyshoul dbeexpensed
asincurred, (
5)t hecostsassociatedwithissui
ngshar esreducethepr oceedsfrom the
i
ssuanceandr educecont r
ibutedcapit
al,and(6)t heaccount
ingforpar ,
noparandnopar
shareswi t
hast atedvalue.

Majordi fferencesr elat et otermi nol ogyused, introduct i

onofi temssuchasr ev aluation
surplus, andpr esent ationofequi tyinformat ion.I naddi ti
on, theaccount ingf ort r
easur yshar e
reti
rement sdiffersbet weenI FRSandU. S.GAAP.UnderU. S.GAAPacompanyhast heopt i
on
ofchar gingt heexcessoft hecostoft reasur yshar esov erparv aluet o( 1)r etainedear nings,
(2)allocatet hedi f
fer encebet weencont ributedcapi talandr etainedear nings, or( 3)char ge
theent i
r eamountt ocont r
ibutedcapi t
al.UnderI FRS, t
heexcessmayhav etobechar gedt o
contributedcapi t
al,dependi ngont heor iginaltransact ionrel atedt ot hei ssuanceoft hest ock.
AnI FRS/ U.S.GAAPdi f
ferencer elatest ot heaccountRev aluat i
onSur plus.Rev aluationsur plus
ari
sesunderI FRSbecausecompani esar eper mi ttedt orev aluet hei rproper ty,plantand
equipmentt of airvalueundercer taincircumst ances.Thi saccounti spar tofgener alreserves
underI FRSandi snotconsi der edcont ri
but edcapi tal.Whi l
ebot hIFRSandU. S.GAAPconsi der
thest atementofst ockhol ders’ equi tyapr imar yf i
nanci alstat ement ,underI FRS, acompany
hast heopt ionofpr epar ingast atementofst ockhol ders’equi tysimi l
art oU. S.GAAPor
prepar i
ngast atementofr ecogni zedi ncomeandexpense( SoRI E).Thest atementofSoRI E
reportst heitemst hatwer echar geddi r
ect l
yt oequi t
ysuchasr evaluat i
onsur plusandt hen
addst heneti ncomef ortheper iodt oar riveatt otal recognizedi ncomeandexpense.I nt his
sit
uat i
on, additional not edisclosur eisrequi redt opr ov i
der econci liationsofot herequi tyit
ems.

2.Bri
efl
ydiscusstheimpli
cat
ionsofthef
inanci
alst
atementpr
esent
ati
onpr
ojectf
ort
he
repor
ti
ngofst ockhol
der
s’equi
ty.

2.I ti
sli
kelythatt hestatementofstockholder
s’equityandi
tspresentat
ionwillbeexami ned
closel
yinthefinancialstatementpresentat
ionproj
ect.Thest
atementofr ecognizedi
ncome
andexpensenowper mittedunderIFRSwi l
lpr
obablybeelimi
nated.I
naddi t
iontheoptionsof
howt opresentothercompr ehensi
veincomeunderU. S.GAAPwi l
lchangeinanyconv erged
standar
dint hi
sar ea.Also,theFASBhasbeenwor ki
ngonast andardthatwilll
i
kelyconv erge
toIFRSinthear eaofhy bridfi
nanci
al i
nstr
uments.