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Equity Soal

Phelps Corporation issued shares and completed other equity transactions in 2015. It issued 20,000 ordinary shares at $16 each on January 11. On February 1, it issued 4,000 preference shares to Sanchez Corp in exchange for assets worth $480,000. It purchased 1,800 ordinary shares at $17 each on July 29. On August 10, it sold those 1,800 treasury shares at $14 each. It declared dividends on ordinary and preference shares on December 31. Clemson Company repurchased treasury shares and reissued some in 2015. On February 1 it repurchased 2,000 shares at €19 each. On March 1 it reissued 800 of those shares at €17

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1K views2 pages

Equity Soal

Phelps Corporation issued shares and completed other equity transactions in 2015. It issued 20,000 ordinary shares at $16 each on January 11. On February 1, it issued 4,000 preference shares to Sanchez Corp in exchange for assets worth $480,000. It purchased 1,800 ordinary shares at $17 each on July 29. On August 10, it sold those 1,800 treasury shares at $14 each. It declared dividends on ordinary and preference shares on December 31. Clemson Company repurchased treasury shares and reissued some in 2015. On February 1 it repurchased 2,000 shares at €19 each. On March 1 it reissued 800 of those shares at €17

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Vinna Zhuang
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P15-1 (Equity Transactions and Statement Preparation)

On January 5, 2015, Phelps Corporation received a charter granting the right to issue 5,000 shares of $100 par
value, 8% cumulative and non-participating preference shares, and 50,000 shares of $10 par value ordinary
shares. It then completed these transactions.

 Jan. 11 Issued 20,000 ordinary shares at $16 per share.


 Feb. 1 Issued to Sanchez Corp. 4,000 preference shares for the following assets: machinery with a fair
value of $50,000; a factory building with a fair value of $160,000; and land with an appraised value of
$270,000.
 July 29 Purchased 1,800 ordinary shares at $17 per share. (Use cost method.)
 Aug. 10 Sold the 1,800 treasury shares at $14 per share.
 Dec. 31 Declared a $0.25 per share cash dividend on the ordinary shares and declared the preference
dividend.
 Dec. 31 Closed the Income Summary account. There was $175,700 net income.

Instructions (a) Record the journal entries for the transactions listed above. (b) Prepare the equity section of
Phelps Corporation’s statement of financial position as of December 31, 2015.

P15-2 (Treasury Share Transactions and Presentation)

Clemson Company had the following equity as of January 1, 2015.

Share capital—ordinary, €5 par value, 20,000 shares issued €100,000


Share premium—ordinary 300,000
Retained earnings 320,000
Total equity €720,000

During 2015, the following transactions occurred.


Feb. 1 Clemson repurchased 2,000 treasury shares at a price of €19 per share.
Mar. 1 800 shares of treasury shares repurchased above were reissued at €17 per share.
Mar. 18 500 shares of treasury shares repurchased above were reissued at €14 per share.
Apr. 22 600 shares of treasury shares repurchased above were reissued at €20 per share.

Instructions (a) Prepare the journal entries to record the treasury share transactions in 2015, assuming Clemson
uses the cost method. (b) Prepare the equity section of the statement of financial position as of April 30, 2015. Net
income for the first 4 months of 2015 was €130,000.
P15-6 (Treasury Shares—Cost Method—Equity Section Preparation)
Washington Company has the following equity accounts at December 31, 2015.

Share Capital—Ordinary—$100 par value, authorized 8,000 shares $480,000


Retained Earnings 294,000

Instructions
(a) Prepare entries in journal form to record the following transactions, which took place during 2016.
(1) 280 ordinary shares were purchased at $97 per share. (These are to be accounted for using the cost
method.) (2) A $20 per share cash dividend was declared.
(3) The dividend declared in No. 2 above was paid.
(4) The treasury shares purchased in No. 1 above were resold at $102 per share.
(5) 500 shares were purchased at $105 per share.
(6) 350 of the shares purchased in No. 5 above were resold at $96 per share.

(b) Prepare the equity section of Washington Company’s statement of financial position after giving effect to
these transactions, assuming that the net income for 2016 was $94,000. Country law requires restriction of
retained earnings for the amount of treasury shares.

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