Financial Accounting II

Exercise on Equity
1. Key Co. issued 300 shares of $10 par value ordinary shares for $4,500. Prepare Key's journal
entry.
2. AG issued 600 shares of no-par ordinary shares for $8,200. Prepare AG's journal entry if (a)
the shares have no stated value, and (b) the shares have a stated value of $2 per share.
3. On February 1, 2019, Ground plc issued 3,000 shares of its $5 par value ordinary shares for
land worth $31,000. Prepare the February 1, 2019, journal entry.
4. Moonwalker Corporation issued 2,000 shares of its $10 par value ordinary shares for
$60,000. Moonwalker also incurred $1,500 of costs associated with issuing the shares.
Prepare Moonwalker's journal entry to record the issuance of the company's shares
5. Sprinkle has outstanding 10,000 shares of $10 par value ordinary shares. On July 1, 2019,
Sprinkle reacquired 100 shares at $87 per share. On September 1, Sprinkle reissued 60 shares
at $90 per share. On November 1, Sprinkle reissued 40 shares at $83 per share. Prepare
Sprinkle's journal entries to record these transactions using the cost method.
6. Woolford Inc. declared a cash dividend of $1 per share on its 2 million outstanding shares.
The dividend was declared on August 1, payable on September 9 to all shareholders of record
on August 15. Prepare all journal entries necessary on those three dates.
7. Silva owns shares of Costa. classified as a trading equity investment. At December 31, 2019,
the trading equity investment was carried in Silva's accounting records at its cost of
$875,000, which equals its fair value. On September 21, 2020, when the fair value of the
investment was $1,200,000, Silva declared a property dividend whereby the Costa securities
are to be distributed on October 23, 2020, to shareholders of record on October 8, 2020.
Prepare all journal entries necessary on those three dates
8. Zhang Mining Company declared, on April 20, a dividend of $500,000,000 payable on June
1. Of this amount, $125,000,000 is a return of capital. Prepare the April 20 and June 1 entries
for Zhang.
9. Green Day Corporation has outstanding 400,000 shares of $10 par value ordinary shares. The
corporation declares a 5% share dividend when the fair value is $65 per share. Prepare the
journal entries for Green Day Corporation for both the date of declaration and the date of
distribution.

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10. Abernathy Corporation was organized on January 1, 2019. 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.
Jan. 10: Issued 80,000 ordinary shares for cash at $5 per share.
Mar. 1: Issued 5,000 preference shares for cash at $108 per share.
Apr. 1: Issued 24,000 ordinary shares for land. The asking price of the land was $90,000; the
fair value of the land was $80,000.
May 1: Issued 80,000 ordinary shares for cash at $7 per share.
Aug.1: Issued 10,000 ordinary shares to attorneys in payment of their bill of $50,000 for
services rendered in helping the company organize.
Sept.1: Issued 10,000 ordinary shares for cash at $9 per share.
Nov.1: Issued 1,000 preference shares for cash at $112 per share.
Instructions: Prepare the journal entries to record the above transactions.

11. Hartman 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.
Instructions:
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 dollar)
b. Prepare the journal entry for the issuance when only the fair value of the ordinary shares
($170 per share) is known.

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