CHAPTER 15 STOCKHOLDERS EQUITY. IFRS questions are available at the end of this chapter. TRUE-FALSE Conceptual

Transcription

1 CHAPTER 15 STOCKHOLDERS EQUITY IFRS questions re ville t the en of this hpter. TRUE-FALSE Coneptul Answer T F T F T F T F F T F T T F F T T F F T No. Desription Stte orportion inorportes in. Definition of preemptive right. Common stok s resiul interest. Erne pitl efinition. Reporting true no-pr stok. Alloting proees in lump sum sles. Aounting for stok issue for nonsh onsiertion. Definition of tresury stok. Reporting tresury stok uner ost metho. Selling tresury stok elow ost. Prtiipting preferre stok. Cllle preferre stok. Restriting legl pitl. Dislosing ivien poliy. Affet of iviens on totl stokholers equity. Property iviens efinition. Aounting for smll stok ivien. Stok splits n lrge stok iviens. Computing rte of return on ommon stok equity. Computing pyout rtio. MULTIPLE CHOICE Coneptul Answer No. Desription S 24. S P 33. S 34. S 35. S 36. P 37. Nture of stokholers' interest. Pre-emptive right. Pre-emptive right. Definition of legl pitl. Definition of resiul owner. Nture of stokholers' equity. Soures of stokholers' equity. Clssifition of stokholers' equity. Allotion methos for lump sum issune. Cpitl stok issue in pyment of servies. Costs of issuing pitl stok. Cretion of "seret reserves." Authorize shres. Pr vlue stok. Legl restritions for profit istriutions. Aquisition of tresury shres. Tresury shres efinition.

2 15-2 Test Bnk for Intermeite Aounting, Thirteenth Eition 38. Purhse of tresury stok t greter thn pr vlue. MULTIPLE CHOICE Coneptul (ont.) Answer No. Desription P 45. S P 67. *68. *69. *70. Sle of tresury stok. Reissue tresury stok t less thn quisition ost. Reissue tresury stok t greter thn quisition ost. Effet of tresury stok trnstions. Preferre stok et fetures. Cumultive feture of preferre stok. Reporting reeemle stok. Reporting iviens in rrers. Issue vs. outstning ommon stok. Timing of entry to reor iviens. Shres entitle to reeive sh ivien. Aounting for property ivien. Distriution of property ivien. Liquiting ivien. Entry to reor liquiting ivien. Effets of stok ivien. Effets of stok ivien. Effet of lrge stok ivien. Lrge stok ivien. Smll stok ivien. Smll stok ivien. Clssifition of stok iviens istriutle. Effet of stok splits n stok iviens. Effet of stok split. Dislosures in the lne sheet. Return on ommon stok equity lultion. Pyout rtio lultion. Book vlue per shre. Computing ook vlue per shre. Diviens n tresury stok. Nonumultive preferre stok n iviens in rrers. Dislosure of preferre iviens in rrers. P These questions lso pper in the Prolem-Solving Survivl Guie. These questions lso pper in the Stuy Guie. *This topi is elt with in n Appenix to the hpter. S MULTIPLE CHOICE Computtionl Answer No. Desription Composition of stokholers' equity. Clultion of totl pi-in pitl. Alloting proees in lump sum sles. Alloting proees in lump sum sles. Computing totl pi-in pitl. Alloting proees in lump sum sles.

3 Stokholers Equity 77. Alloting proees in lump sum sles. MULTIPLE CHOICE Computtionl (ont.) Answer No *115. *116. *117. *118. *119. Desription Computing pi-in pitl from tresury stok trnstions. Reoring purhse of tresury stok. Reissue tresury stok ove quisition ost. Reissue tresury stok ost metho. Aitionl pi-in pitl with tresury stok trnstions. Clultion of itionl pi-in pitl. Clultion of itionl pi-in pitl. Totl stokholers' equity with tresury stok trnstions. Totl stokholers' equity with tresury stok exhnge. Clulte iviens for umultive preferre shres. Clulte iviens for ommon shres. Clulte iviens for ommon shres. Reution in retine ernings from property iviens. Reution in retine ernings from property iviens. Reution in retine ernings use y property ivien. Reution in retine ernings from property iviens. Reution in retine ernings from property iviens. Derese in retine ernings from sh n stok iviens. Clultion of lrge stok ivien. Clultion of smll stok ivien. Clultion of smll stok ivien. Smll stok ivien's effet on retine ernings. Blne of retine ernings fter smll stok ivien. Clulte retine ernings ville for iviens. Clulte erese in retine ernings. Clulte the pyout rtio. Clulte ook vlue per shre. Use sme esrip. s 101. Use sme esrip. s 102. Clulte rte of return on ommon stok equity. Clulte prie-ernings rtio. Clulte iviens pi to ommon stokholers. Rte of return on ommon stok equity. Determine the rte of return on ommon stok equity. Determine ook vlue per shre. Computtion of pyout rtio. Computtion of ook vlue per shre. Allotion of sh ivien to ommon n preferre shres. Csh iviens for umultive preferre shres. Csh iviens for umultive prtiipting preferre shres. Csh ivien llotion with prtiipting preferre shres. Csh ivien for umultive preferre shres. 15-3

4 15-4 Test Bnk for Intermeite Aounting, Thirteenth Eition MULTIPLE CHOICE CPA Apte Answer No *130. Desription Cpitl stok issue in pyment of servies. Proees from preferre stok in lump sum issue. Determine pi-in pitl from tresury stok. Reissue tresury stok ost metho. Effet of the reissune of tresury stok. Entry to reor property iviens elre. Effet of liquiting ivien. Effet of stok ivien. Stok ivien when mrket prie exees pr vlue. Blne of retine ernings following stok ivien. Allotion of sh ivien to ommon n preferre shres. EXERCISES E E E E E E E E E *E *E Desription Lump sum issune of stok. Tresury stok. Tresury stok. Tresury stok. Tresury stok. Stokholers equity. Stok iviens. Stok iviens n stok splits. Computtion of selete rtios. Diviens on preferre stok. Diviens on preferre stok. PROBLEMS P P P P *P Desription Equity trnstions. Tresury stok trnstions. Stok iviens. Equity trnstions. Diviens on preferre n ommon stok.

5 Stokholers Equity 15-5 CHAPTER LEARNING OBJECTIVES 1. Disuss the hrteristis of the orporte form of orgniztion. 2. Ientify the key omponents of stokholers' equity. 3. Explin the ounting proeures for issuing shres of stok. 4. Desrie the ounting for tresury stok. 5. Explin the ounting for n reporting of preferre stok. 6. Desrie the poliies use in istriuting iviens. 7. Ientify the vrious forms of ivien istriutions. 8. Explin the ounting for smll n lrge stok iviens, n for stok splits. 9. Inite how to present n nlyze stokholers equity. *10. Explin the ifferent types of preferre stok iviens n their effet on ook vlue per shre.

6 15-6 Test Bnk for Intermeite Aounting, Thirteenth Eition SUMMARY OF LEARNING OBJECTIVES BY QUESTIONS Ite Typ 1. TF 4. TF TF TF TF S 36. TF TF TF Ite Typ Ite 2. TF S P TF TF TF 14. TF S 34. P P S TF TF TF TF TF TF Note: TF = True-Flse = Multiple Choie E = Exerise P = Prolem Typ Ite Typ Ite Lerning Ojetive 1 TF Lerning Ojetive Lerning Ojetive 3 S Lerning Ojetive Lerning Ojetive Lerning Ojetive 6 Lerning Ojetive Lerning Ojetive Lerning Ojetive 9 P Lerning Ojetive * Ty Ite Typ Ite S Typ E P E E E E P E P P E E P P E E E P

7 Stokholers Equity 15-7 TRUE-FALSE Coneptul 1. A orportion is inorporte in only one stte regrless of the numer of sttes in whih it opertes. 2. The preemptive right llows stokholers the right to vote for iretors of the ompny. 3. Common stok is the resiul orporte interest tht ers the ultimte risks of loss. 4. Erne pitl onsists of itionl pi-in pitl n retine ernings. 5. True no-pr stok shoul e rrie in the ounts t issue prie without ny itionl pi-in pitl reporte. 6. Compnies llote the proees reeive from lump-sum sle of seurities se on the seurities pr vlues. 7. Compnies shoul reor stok issue for servies or nonsh property t either the fir vlue of the stok issue or the fir vlue of the onsiertion reeive. 8. Tresury stok is ompny s own stok tht hs een require n retire. 9. The ost metho reors ll trnstions in tresury shres t their ost n reports the tresury stok s eution from pitl stok. 10. When orportion sells tresury stok elow its ost, it usully eits the ifferene etween ost n selling prie to Pi-in Cpitl from Tresury Stok. 11. Prtiipting preferre stok requires tht if ompny fils to py ivien in ny yer, it must mke it up in lter yer efore pying ny ommon iviens. 12. Cllle preferre stok permits the orportion t its option to reeem the outstning preferre shres t stipulte pries. 13. The lws of some sttes require tht orportions restrit their legl pitl from istriution to stokholers. 14. The SEC requires ompnies to islose their ivien poliy in their nnul report. 15. All iviens, exept for liquiting iviens, reue the totl stokholers equity of orportion. 16. Diviens pyle in ssets of the orportion other thn sh re lle property iviens or iviens in kin. 17. When stok ivien is less thn perent of the ommon stok outstning, ompny is require to trnsfer the fir vlue of the stok issue from retine ernings. 18. Stok splits n lrge stok iviens hve the sme effet on ompny s retine ernings n totl stokholers equity.

8 Test Bnk for Intermeite Aounting, Thirteenth Eition The rte of return on ommon stok equity is ompute y iviing net inome y the verge ommon stokholers equity. 20. The pyout rtio is etermine y iviing sh iviens pi to ommon stokholers y net inome ville to ommon stokholers. True-Flse Answers Coneptul Ans. T F T F T Ans. F T F F T Ans. F T T F F Ans. T T F F T MULTIPLE CHOICE Coneptul 21. The resiul interest in orportion elongs to the. mngement.. reitors.. ommon stokholers.. preferre stokholers. 22. The pre-emptive right of ommon stokholer is the right to. shre proportiontely in orporte ssets upon liquition.. shre proportiontely in ny new issues of stok of the sme lss.. reeive sh iviens efore they re istriute to preferre stokholers.. exlue preferre stokholers from voting rights. 23. The pre-emptive right enles stokholer to. shre proportiontely in ny new issues of stok of the sme lss.. reeive sh iviens efore other lsses of stok without the pre-emptive right.. sell pitl stok k to the orportion t the option of the stokholer.. reeive the sme mount of iviens on perentge sis s the preferre stokholers. S 24. In orporte form of usiness orgniztion, legl pitl is est efine s. the mount of pitl the stte of inorportion llows the ompny to umulte over its existene.. the pr vlue of ll pitl stok issue.. the mount of pitl the feerl government llows orportion to generte.. the totl pitl rise y orportion within the limits set y the Seurities n Exhnge Commission.

9 Stokholers Equity S Stokholers of usiness enterprise re si to e the resiul owners. The term resiul owner mens tht shreholers. re entitle to ivien every yer in whih the usiness erns profit.. hve the rights to speifi ssets of the usiness.. er the ultimte risks n unertinties n reeive the enefits of enterprise ownership.. n negotite iniviul ontrts on ehlf of the enterprise. 26. Totl stokholers' equity represents. lim to speifi ssets ontriute y the owners.. the mximum mount tht n e orrowe y the enterprise.. lim ginst portion of the totl ssets of n enterprise.. only the mount of ernings tht hve een retine in the usiness. 27. A primry soure of stokholers' equity is. inome retine y the orportion.. pproprite retine ernings.. ontriutions y stokholers.. oth inome retine y the orportion n ontriutions y stokholers. 28. Stokholers' equity is generlly lssifie into two mjor tegories:. ontriute pitl n pproprite pitl.. pproprite pitl n retine ernings.. retine ernings n unpproprite pitl.. erne pitl n ontriute pitl. 29. The ounting prolem in lump sum issune is the llotion of proees etween the lsses of seurities. An eptle metho of llotion is the. pro form metho.. proportionl metho.. inrementl metho.. either the proportionl metho or the inrementl metho. 30. When orportion issues its pitl stok in pyment for servies, the lest pproprite sis for reoring the trnstion is the. mrket vlue of the servies reeive.. pr vlue of the shres issue.. mrket vlue of the shres issue.. Any of these provies n pproprite sis for reoring the trnstion. 31. Diret osts inurre to sell stok suh s unerwriting osts shoul e ounte for s 1. reution of itionl pi-in pitl. 2. n expense of the perio in whih the stok is issue. 3. n intngile sset or 3

10 15-10 Test Bnk for Intermeite Aounting, Thirteenth Eition 32. A "seret reserve" will e rete if. inequte epreition is hrge to inome.. pitl expeniture is hrge to expense.. liilities re unerstte.. stokholers' equity is overstte. P Whih of the following represents the totl numer of shres tht orportion my issue uner the terms of its hrter?. uthorize shres. issue shres. unissue shres. outstning shres S Stok tht hs fixe per-shre mount printe on eh stok ertifite is lle. stte vlue stok.. fixe vlue stok.. uniform vlue stok.. pr vlue stok. S Whih of the following is not legl restrition relte to profit istriutions y orportion?. The mount istriute to owners must e in ompline with the stte lws governing orportions.. The mount istriute in ny one yer n never exee the net inome reporte for tht yer.. Profit istriutions must e formlly pprove y the or of iretors.. Diviens must e in full greement with the pitl stok ontrts s to preferenes n prtiiption. S In Jnury 2010, Finley Corportion, newly forme ompny, issue 10,000 shres of its $10 pr ommon stok for $15 per shre. On July 1, 2010, Finley Corportion require 1,000 shres of its outstning stok for $12 per shre. The quisition of these tresury shres. erese totl stokholers' equity.. inrese totl stokholers' equity.. i not hnge totl stokholers' equity.. erese the numer of issue shres. P 37. Tresury shres re. shres hel s n investment y the tresurer of the orportion.. shres hel s n investment of the orportion.. issue n outstning shres.. issue ut not outstning shres. 38. When tresury stok is purhse for more thn the pr vlue of the stok n the ost metho is use to ount for tresury stok, wht ount(s) shoul e eite?. Tresury stok for the pr vlue n pi-in pitl in exess of pr for the exess of the purhse prie over the pr vlue.. Pi-in pitl in exess of pr for the purhse prie.. Tresury stok for the purhse prie.. Tresury stok for the pr vlue n retine ernings for the exess of the purhse prie over the pr vlue

11 Stokholers Equity Gins" on sles of tresury stok (using the ost metho) shoul e reite to. pi-in pitl from tresury stok.. pitl stok.. retine ernings.. other inome. 40. Porter Corp. purhse its own pr vlue stok on Jnury 1, 2010 for $20,000 n eite the tresury stok ount for the purhse prie. The stok ws susequently sol for $12,000. The $8,000 ifferene etween the ost n sles prie shoul e reore s eution from. itionl pi-in pitl to the extent tht previous net "gins" from sles of the sme lss of stok re inlue therein; otherwise, from retine ernings.. itionl pi-in pitl without regr s to whether or not there hve een previous net "gins" from sles of the sme lss of stok inlue therein.. retine ernings.. net inome. 41. How shoul "gin" from the sle of tresury stok e reflete when using the ost metho of reoring tresury stok trnstions?. As orinry ernings shown on the inome sttement.. As pi-in pitl from tresury stok trnstions.. As n inrese in the mount shown for ommon stok.. As n extrorinry item shown on the inome sttement. 42. Whih of the following est esries possile result of tresury stok trnstions y orportion?. My inrese ut not erese retine ernings.. My inrese net inome if the ost metho is use.. My erese ut not inrese retine ernings.. My erese ut not inrese net inome. 43. Whih of the following fetures of preferre stok mkes the seurity more like et thn n equity instrument?. Prtiipting. Voting. Reeemle. Nonumultive 44. The umultive feture of preferre stok. limits the mount of umultive iviens to the pr vlue of the preferre stok.. requires tht iviens not pi in ny yer must e me up in lter yer efore iviens re istriute to ommon shreholers.. mens tht the shreholer n umulte preferre stok until it is equl to the pr vlue of ommon stok t whih time it n e onverte into ommon stok.. enles preferre stokholer to umulte iviens until they equl the pr vlue of the stok n reeive the stok in ple of the sh iviens. P 45. Aoring to the FASB, reeemle preferre stok shoul e. inlue with ommon stok.. inlue s liility.. exlue from the stokholers equity heing.. inlue s ontr item in stokholers' equity.

12 15-12 Test Bnk for Intermeite Aounting, Thirteenth Eition S 46. Cumultive preferre iviens in rrers shoul e shown in orportion's lne sheet s. n inrese in urrent liilities.. n inrese in stokholers' equity.. footnote.. n inrese in urrent liilities for the urrent portion n long-term liilities for the long-term portion. 47. At the te of the finnil sttements, ommon stok shres issue woul exee ommon stok shres outstning s result of the. elrtion of stok split.. elrtion of stok ivien.. purhse of tresury stok.. pyment in full of susrie stok. 48. An entry is not me on the. te of elrtion.. te of reor.. te of pyment.. An entry is me on ll of these tes. 49. Csh iviens re pi on the sis of the numer of shres. uthorize.. issue.. outstning.. outstning less the numer of tresury shres. 50. Whih of the following sttements out property iviens is not true?. A property ivien is usully in the form of seurities of other ompnies.. A property ivien is lso lle ivien in kin.. The ounting for property ivien shoul e se on the rrying vlue (ook vlue) of the nonmonetry ssets trnsferre.. All of these sttements re true. 51. Houser Corportion owns 4,000,000 shres of stok in Bh Corportion. On Deemer 31, 2010, Houser istriute these shres of stok s ivien to its stokholers. This is n exmple of. property ivien.. stok ivien.. liquiting ivien.. sh ivien. 52. A ivien whih is return to stokholers of portion of their originl investments is. liquiting ivien.. property ivien.. liility ivien.. prtiipting ivien.

13 Stokholers Equity A mining ompny elre liquiting ivien. The journl entry to reor the elrtion must inlue eit to. Retine Ernings.. pi-in pitl ount.. Aumulte Depletion.. Aumulte Depreition. 54. If mngement wishes to "pitlize" prt of the ernings, it my issue. sh ivien.. stok ivien.. property ivien.. liquiting ivien. 55. Whih iviens o not reue stokholers' equity?. Csh iviens. Stok iviens. Property iviens. Liquiting iviens 56. The elrtion n issune of stok ivien lrger thn 25% of the shres previously outstning. inreses ommon stok outstning n inreses totl stokholers' equity.. ereses retine ernings ut oes not hnge totl stokholers' equity.. my inrese or erese pi-in pitl in exess of pr ut oes not hnge totl stokholers' equity.. inreses retine ernings n inreses totl stokholers' equity. 57. Quirk Corportion issue 100% stok ivien of its ommon stok whih h pr vlue of $10 efore n fter the ivien. At wht mount shoul retine ernings e pitlize for the itionl shres issue?. There shoul e no pitliztion of retine ernings.. Pr vlue. Mrket vlue on the elrtion te. Mrket vlue on the pyment te 58. The issuer of 5% ommon stok ivien to ommon stokholers preferly shoul trnsfer from retine ernings to ontriute pitl n mount equl to the. mrket vlue of the shres issue.. ook vlue of the shres issue.. minimum legl requirements.. pr or stte vlue of the shres issue. 59. At the te of elrtion of smll ommon stok ivien, the entry shoul not inlue. reit to Common Stok Divien Pyle.. reit to Pi-in Cpitl in Exess of Pr.. eit to Retine Ernings.. All of these re eptle.

14 15-14 Test Bnk for Intermeite Aounting, Thirteenth Eition 60. The lne in Common Stok Divien Distriutle shoul e reporte s (n). eution from ommon stok issue.. ition to pitl stok.. urrent liility.. ontr urrent sset. 61. A feture ommon to oth stok splits n stok iviens is. trnsfer to erne pitl of orportion.. tht there is no effet on totl stokholers' equity.. n inrese in totl liilities of orportion.. reution in the ontriute pitl of orportion. 62. Wht effet oes the issune of 2-for-1 stok split hve on eh of the following?.... Pr Vlue per Shre No effet Inrese Derese Derese Retine Ernings No effet No effet No effet Derese 63. Whih one of the following islosures shoul e me in the equity setion of the lne sheet, rther thn in the notes to the finnil sttements?. Divien preferenes. Liquition preferenes. Cll pries. Conversion or exerise pries 64. The rte of return on ommon stok equity is lulte y iviing. net inome less preferre iviens y verge ommon stokholers equity.. net inome y verge ommon stokholers equity.. net inome less preferre iviens y ening ommon stokholers equity.. net inome y ening ommon stokholers equity. 65. The pyout rtio n e lulte y iviing. iviens per shre y ernings per shre.. sh iviens y net inome less preferre iviens.. sh iviens y mrket prie per shre.. iviens per shre y ernings per shre n iviing sh iviens y net inome less preferre iviens. 66. Younger Compny hs outstning oth ommon stok n nonprtiipting, nonumultive preferre stok. The liquition vlue of the preferre is equl to its pr vlue. The ook vlue per shre of the ommon stok is unffete y. the elrtion of stok ivien on preferre pyle in preferre stok when the mrket prie of the preferre is equl to its pr vlue.. the elrtion of stok ivien on ommon stok pyle in ommon stok when the mrket prie of the ommon is equl to its pr vlue.. the pyment of previously elre sh ivien on the ommon stok.. 2-for-1 split of the ommon stok.

15 Stokholers Equity P Assume ommon stok is the only lss of stok outstning in the Mnley Corportion. Totl stokholers' equity ivie y the numer of ommon stok shres outstning is lle. ook vlue per shre.. pr vlue per shre.. stte vlue per shre.. mrket vlue per shre. *68. Diviens re not pi on. nonumultive preferre stok.. nonprtiipting preferre stok.. tresury ommon stok.. Diviens re pi on ll of these. *69. Nonumultive preferre iviens in rrers. re not pi or islose.. must e pi efore ny other sh iviens n e istriute.. re islose s liility until pi.. re pi to preferre stokholers if suffiient funs remin fter pyment of the urrent preferre ivien. *70. How shoul umultive preferre iviens in rrers e shown in orportion's sttement of finnil position?. Note islosure. Inrese in stokholers' equity. Inrese in urrent liilities. Inrese in urrent liilities for the mount expete to e elre within the yer or operting yle, n inrese in long-term liilities for the lne 67. Multiple Choie Answers Coneptul Ans Ans Ans Ans Ans. Ans. Ans *68. *69. *70.

16 15-16 Test Bnk for Intermeite Aounting, Thirteenth Eition MULTIPLE CHOICE Computtionl Use the following informtion for questions 71 n 72. Presente elow is informtion relte to Hle Corportion: Common Stok, $1 pr Pi-in Cpitl in Exess of Pr Common Stok Preferre 8 1/2% Stok, $50 pr Pi-in Cpitl in Exess of Pr Preferre Stok Retine Ernings Tresury Common Stok (t ost) $4,300, ,000 2,000, ,000 1,500, , The totl stokholers' equity of Hle Corportion is. $8,600,000.. $8,750,000.. $7,100,000.. $7,250, The totl pi-in pitl (sh ollete) relte to the ommon stok is. $4,300,000.. $4,850,000.. $5,250,000.. $4,700, Mnning Compny issue 10,000 shres of its $5 pr vlue ommon stok hving mrket vlue of $25 per shre n 15,000 shres of its $15 pr vlue preferre stok hving mrket vlue of $20 per shre for lump sum of $480,000. How muh of the proees woul e llote to the ommon stok?. $50,000. $218,182. $250,000. $255, Norton Compny issues 4,000 shres of its $5 pr vlue ommon stok hving mrket vlue of $25 per shre n 6,000 shres of its $15 pr vlue preferre stok hving mrket vlue of $20 per shre for lump sum of $192,000. Wht mount of the proees shoul e llote to the preferre stok?. $172,000. $120,000. $104,727. $90, Berry Corportion hs 50,000 shres of $10 pr ommon stok uthorize. The following trnstions took ple uring 2010, the first yer of the orportion s existene: Sol 5,000 shres of ommon stok for $18 per shre. Issue 5,000 shres of ommon stok in exhnge for ptent vlue t $100,000. At the en of the Berry s first yer, totl pi-in pitl mounte to. $40,000.. $90,000.. $100,000.. $190,000.

17 Stokholers Equity Glvine Compny issues 6,000 shres of its $5 pr vlue ommon stok hving mrket vlue of $25 per shre n 9,000 shres of its $15 pr vlue preferre stok hving mrket vlue of $20 per shre for lump sum of $288,000. The proees llote to the ommon stok is. $30,000. $130,909. $150,000. $157, Wheeler Compny issue 5,000 shres of its $5 pr vlue ommon stok hving mrket vlue of $25 per shre n 7,500 shres of its $15 pr vlue preferre stok hving mrket vlue of $20 per shre for lump sum of $240,000. The proees llote to the preferre stok is. $215,000. $150,000. $130,909. $109, Pemer Corportion strte usiness in 2005 y issuing 200,000 shres of $20 pr ommon stok for $36 eh. In 2010, 20,000 of these shres were purhse for $52 per shre y Pemer Corportion n hel s tresury stok. On June 15, 2011, these 20,000 shres were exhnge for piee of property tht h n ssesse vlue of $810,000. Perer s stok is tively tre n h mrket prie of $60 on June 15, The ost metho is use to ount for tresury stok. The mount of pi-in pitl from tresury stok trnstions resulting from the ove events woul e. $800,000.. $480,000.. $390,000.. $160, On Septemer 1, 2010, Vlez Compny require 12,000 shres of its $10 pr vlue ommon stok for $15 per shre. Vlez uses the ost metho to ount for tresury stok. The journl entry to reor the requisition of the stok shoul eit. Tresury Stok for $120,000.. Common Stok for $120,000.. Common Stok for $120,000 n Pi-in Cpitl in Exess of Pr for $60,000.. Tresury Stok for $180, Gnnon Compny quire 6,000 shres of its own ommon stok t $20 per shre on Ferury 5, 2010, n sol 3,000 of these shres t $27 per shre on August 9, The mrket vlue of Gnnon's ommon stok ws $24 per shre t Deemer 31, 2010, n $25 per shre t Deemer 31, The ost metho is use to reor tresury stok trnstions. Wht ount(s) shoul Gnnon reit in 2011 to reor the sle of 3,000 shres?. Tresury Stok for $81,000.. Tresury Stok for $60,000 n Pi-in Cpitl from Tresury Stok for $21,000.. Tresury Stok for $60,000 n Retine Ernings for $21,000.. Tresury Stok for $72,000 n Retine Ernings for $9,000.

18 15-18 Test Bnk for Intermeite Aounting, Thirteenth Eition 81. Long Co. issue 100,000 shres of $10 pr ommon stok for $1,200,000. Long quire 8,000 shres of its own ommon stok t $15 per shre. Three months lter Long sol 4,000 of these shres t $19 per shre. If the ost metho is use to reor tresury stok trnstions, to reor the sle of the 4,000 tresury shres, Long shoul reit. Tresury Stok for $76,000.. Tresury Stok for $40,000 n Pi-in Cpitl from Tresury Stok for $36,000.. Tresury Stok for $60,000 n Pi-in Cpitl from Tresury Stok for $16,000.. Tresury Stok for $60,000 n Pi-in Cpitl in Exess of Pr for $16, An nlysis of stokholers' equity of Hhn Corportion s of Jnury 1, 2010, is s follows: Common stok, pr vlue $20; uthorize 100,000 shres; issue n outstning 90,000 shres Pi-in pitl in exess of pr Retine ernings Totl $1,800, , ,000 $3,460,000 Hhn uses the ost metho of ounting for tresury stok n uring 2010 entere into the following trnstions: Aquire 2,500 shres of its stok for $75,000. Sol 2,000 tresury shres t $35 per shre. Sol the remining tresury shres t $20 per shre. Assuming no other equity trnstions ourre uring 2010, wht shoul Hhn report t Deemer 31, 2010, s totl itionl pi-in pitl?. $895,000. $900,000. $905,000. $915, Pery Corportion ws orgnize on Jnury 1, 2010, with n uthoriztion of 1,200,000 shres of ommon stok with pr vlue of $6 per shre. During 2010, the orportion h the following pitl trnstions: Jnury 5 July 28 Deemer 31 issue 675,000 $10 per shre purhse 90,000 $11 per shre sol the 90,000 shres hel in $18 per shre Pery use the ost metho to reor the purhse n reissune of the tresury shres. Wht is the totl mount of itionl pi-in pitl s of Deemer 31, 2010?. $-0-.. $2,070,000.. $2,700,000.. $3,330, Sos Co.'s stokholers' equity t Jnury 1, 2010 is s follows: Common stok, $10 pr vlue; uthorize 300,000 shres; Outstning 225,000 shres Pi-in pitl in exess of pr Retine ernings Totl $2,250, ,000 2,190,000 $5,340,000

19 Stokholers Equity During 2010, Sos h the following stok trnstions: Aquire 6,000 shres of its stok for $270,000. Sol 3,600 tresury shres t $50 shre. Sol the remining tresury shres t $41 per shre. No other stok trnstions ourre uring Assuming Sos uses the ost metho to reor tresury stok trnstions, the totl mount of ll itionl pi-in pitl ounts t Deemer 31, 2010 is. $891,600.. $870,000.. $908,400.. $927, Presente elow is the stokholers' equity setion of Oks Corportion t Deemer 31, 2010: Common stok, pr vlue $20; uthorize 75,000 shres; issue n outstning 45,000 shres $ 900,000 Pi-in pitl in exess of pr vlue 250,000 Retine ernings 500,000 $1,650,000 During 2011, the following trnstions ourre relting to stokholers' equity: 3,000 shres were require t $28 per shre. 3,000 shres were require t $35 per shre. 1,800 shres of tresury stok were sol t $30 per shre. For the yer ene Deemer 31, 2011, Oks reporte net inome of $450,000. Assuming Oks ounts for tresury stok uner the ost metho, wht shoul it report s totl stokholers' equity on its Deemer 31, 2011, lne sheet?. $1,965,000.. $1,961,400.. $1,957,800.. $1,515, On Deemer 1, 2010, Ael Corportion exhnge 20,000 shres of its $10 pr vlue ommon stok hel in tresury for use mhine. The tresury shres were quire y Ael t ost of $40 per shre, n re ounte for uner the ost metho. On the te of the exhnge, the ommon stok h mrket vlue of $55 per shre (the shres were originlly issue t $30 per shre). As result of this exhnge, Ael's totl stokholers' equity will inrese y. $200,000.. $800,000.. $1,100,000.. $900,000.

20 15-20 Test Bnk for Intermeite Aounting, Thirteenth Eition 87. Luther In., hs 2,000 shres of 6%, $50 pr vlue, umultive preferre stok n 100,000 shres of $1 pr vlue ommon stok outstning t Deemer 31, 2011, n Deemer 31, The or of iretors elre n pi $5,000 ivien in In 2011, $24,000 of iviens re elre n pi. Wht re the iviens reeive y the preferre stokholers in 2011?. $17,000. $12,000. $ 7,000. $ 6, Aners, In., hs 5,000 shres of 5%, $100 pr vlue, umultive preferre stok n 20,000 shres of $1 pr vlue ommon stok outstning t Deemer 31, There were no iviens elre in The or of iretors elres n pys $45,000 ivien in 2010 n in Wht is the mount of iviens reeive y the ommon stokholers in 2011?. $15,000. $25,000. $45,000. $0 89. Colson In. elre $160,000 sh ivien. It urrently hs 6,000 shres of 7%, $100 pr vlue umultive preferre stok outstning. It is one yer in rrers on its preferre stok. How muh sh will Colson istriute to the ommon stokholers?. $76,000.. $84,000.. $118,000.. None. 90. Pierson Corportion owne 10,000 shres of Hunter Corportion. These shres were purhse in 2007 for $90,000. On Novemer 15, 2011, Pierson elre property ivien of one shre of Hunter for every ten shres of Pierson hel y stokholer. On tht te, when the mrket prie of Hunter ws $14 per shre, there were 90,000 shres of Pierson outstning. Wht gin n net reution in retine ernings woul result from this property ivien? Gin Net Reution in Retine Ernings. $0 $126,000. $0 $ 81,000. $45,000 $ 81,000. $45,000 $ 36,000

21 Stokholers Equity Stinson Corportion owne 30,000 shres of Mtile Corportion. These shres were purhse in 2007 for $270,000. On Novemer 15, 2011, Stinson elre property ivien of one shre of Mtile for every ten shres of Stinson hel y stokholer. On tht te, when the mrket prie of Mtile ws $14 per shre, there were 270,000 shres of Stinson outstning. Wht gin n net reution in retine ernings woul result from this property ivien? Gin Net Reution in Retine Ernings. $0 $243,000. $0 $378,000. $135,000 $108,000. $135,000 $243, Winger Corportion owne 900,000 shres of Fegn Corportion stok. On Deemer 31, 2010, when Winger's ount "Investment in Common Stok of Fegn Corportion" h rrying vlue of $5 per shre, Winger istriute these shres to its stokholers s ivien. Winger originlly pi $8 for eh shre. Fegn hs 3,000,000 shres issue n outstning, whih re tre on ntionl stok exhnge. The quote mrket prie for Fegn shre ws $7 on the elrtion te n $9 on the istriution te. Wht woul e the reution in Winger's stokholers' equity s result of the ove trnstions?. $3,600,000.. $4,500,000.. $7,200,000.. $8,100, Gis Corportion owne 20,000 shres of Oliver Corportion s $5 pr vlue ommon stok. These shres were purhse in 2007 for $180,000. On Septemer 15, 2011, Gis elre property ivien of one shre of Oliver for every ten shres of Gis hel y stokholer. On tht te, when the mrket prie of Oliver ws $14 per shre, there were 180,000 shres of Gis outstning. Wht NET reution in retine ernings woul result from this property ivien?. $90,000. $252,000. $72,000. $162, Melvern s Corportion hs n investment in 5,000 shres of Wlle Compny ommon stok with ost of $218,000. These shres re use in property ivien to stokholers of Melvern s. The property ivien is elre on My 25 n sheule to e istriute on July 31 to stokholers of reor on June 15. The mrket vlue per shre of Wlle stok is $63 on My 25, $66 on June 15, n $68 on July 31. The net effet of this property ivien on retine ernings is reution of. $340,000.. $330,000.. $315,000.. $218,000.

22 15-22 Test Bnk for Intermeite Aounting, Thirteenth Eition 95. Hernnez Compny hs 350,000 shres of $10 pr vlue ommon stok outstning. During the yer, Hernnez elre 10% stok ivien when the mrket prie of the stok ws $30 per shre. Four months lter Hernnez elre $.50 per shre sh ivien. As result of the iviens elre uring the yer, retine ernings erese y. $1,242,500.. $525,000.. $192,500.. $175, On June 30, 2010, when Ermler Co.'s stok ws selling t $65 per shre, its pitl ounts were s follows: Cpitl stok (pr vlue $50; 60,000 shres issue) Premium on pitl stok Retine ernings $3,000, ,000 4,200,000 If 100% stok ivien were elre n istriute, pitl stok woul e. $3,000,000.. $3,600,000.. $6,000,000.. $7,800, The stokholers' equity setion of Gunkel Corportion s of Deemer 31, 2010, ws s follows: Common stok, pr vlue $2; uthorize 20,000 shres; issue n outstning 10,000 shres $ 20,000 Pi-in pitl in exess of pr 30,000 Retine ernings 75,000 $125,000 On Mrh 1, 2011, the or of iretors elre 15% stok ivien, n oringly 1,500 itionl shres were issue. On Mrh 1, 2011, the fir mrket vlue of the stok ws $6 per shre. For the two months ene Ferury 28, 2011, Gunkel sustine net loss of $10,000. Wht mount shoul Gunkel report s retine ernings s of Mrh 1, 2011?. $56,000.. $62,000.. $66,000.. $72,000.

23 Stokholers Equity The stokholers' equity of Howell Compny t July 31, 2010 is presente elow: Common stok, pr vlue $20, uthorize 400,000 shres; issue n outstning 160,000 shres Pi-in pitl in exess of pr Retine ernings $3,200, , ,000 $4,010,000 On August 1, 2010, the or of iretors of Howell elre 15% stok ivien on ommon stok, to e istriute on Septemer 15th. The mrket prie of Howell's ommon stok ws $35 on August 1, 2010, n $38 on Septemer 15, Wht is the mount of the eit to retine ernings s result of the elrtion n istriution of this stok ivien?. $800,000.. $840,000.. $912,000.. $600, On Jnury 1, 2010, Do, In., elre 10% stok ivien on its ommon stok when the mrket vlue of the ommon stok ws $20 per shre. Stokholers' equity efore the stok ivien ws elre onsiste of: Common stok, $10 pr vlue, uthorize 200,000 shres; issue n outstning 120,000 shres Aitionl pi-in pitl on ommon stok Retine ernings Totl stokholers' equity $1,200, , ,000 $2,050,000 Wht ws the effet on Do s retine ernings s result of the ove trnstion?. $120,000 erese. $240,000 erese. $400,000 erese. $200,000 erese 100. On Jnury 1, 2010, Culver Corportion h 110,000 shres of its $5 pr vlue ommon stok outstning. On June 1, the orportion quire 10,000 shres of stok to e hel in the tresury. On Deemer 1, when the mrket prie of the stok ws $8, the orportion elre 10% stok ivien to e issue to stokholers of reor on Deemer 16, Wht ws the impt of the 10% stok ivien on the lne of the retine ernings ount?. $50,000 erese. $80,000 erese. $88,000 erese. No effet

24 15-24 Test Bnk for Intermeite Aounting, Thirteenth Eition 101. At the eginning of 2011, Flherty Compny h retine ernings of $200,000. During the yer Flherty reporte net inome of $100,000, sol tresury stok t gin of $36,000, elre sh ivien of $60,000, n elre n issue smll stok ivien of 3,000 shres ($10 pr vlue) when the mrket vlue of the stok ws $20 per shre. The mount of retine ernings ville for iviens t the en of 2011 ws. $180,000.. $210,000.. $216,000.. $246, Msterson Compny hs 420,000 shres of $10 pr vlue ommon stok outstning. During the yer Msterson elre 5% stok ivien when the mrket prie of the stok ws $36 per shre. Three months lter Msterson elre $.60 per shre sh ivien. As result of the iviens elre uring the yer, retine ernings erese y. $1,020,600. $756,000. $264,600. $252,000 Questions 103 n 104 re se on the following informtion. Lyne Corportion h the following informtion in its finnil sttements for the yers ene 2010 n 2011: Csh iviens for the yer 2011 $ 8,000 Net inome for the yer ene ,000 Mrket prie of stok, 12/31/10 10 Mrket prie of stok, 12/31/11 12 Common stokholers equity, 12/31/10 1,600,000 Common stokholers equity, 12/31/11 1,800,000 Outstning shres, 12/31/11 150,000 Preferre iviens for the yer ene , Wht is the pyout rtio for Lyne Corportion for the yer ene 2011?. 24.7%. 16.1%. 10.3%. 8.6% 104. Wht is the ook vlue per shre for Lyne Corportion for the yer ene 2011?. $ $ $ $10.67

25 Stokholers Equity At the eginning of 2011, Hmilton Compny h retine ernings of $150,000. During the yer Hmilton reporte net inome of $75,000, sol tresury stok t gin of $27,000, elre sh ivien of $45,000, n elre n issue smll stok ivien of 1,500 shres ($10 pr vlue) when the mrket vlue of the stok ws $30 per shre. The mount of retine ernings ville for iviens t the en of 2011 ws:. $184,500.. $162,000.. $157,500.. $135, Mingenk Compny hs 560,000 shres of $10 pr vlue ommon stok outstning. During the yer Mingenk elre 5% stok ivien when the mrket prie of the stok ws $48 per shre. Two months lter Mingenk elre $.60 per shre sh ivien. As result of the iviens elre uring the yer, retine ernings erese y:. $336,000.. $352,800.. $1,344,000.. $1,696,800. Questions 107 n 108 re se on the following informtion. Sely Corportion h the following informtion in its finnil sttements for the yers ene 2010 n 2011: Csh iviens for the yer 2011 $ 5,000 Net inome for the yer ene ,000 Mrket prie of stok, 12/31/10 10 Mrket prie of stok, 12/31/11 12 Common stokholers equity, 12/31/10 1,000,000 Common stokholers equity, 12/31/11 1,200,000 Outstning shres, 12/31/11 100,000 Preferre iviens for the yer ene , Wht is the rte of return on ommon stok equity for Sely Corportion for the yer ene 2011?. 6.5%. 6.0%. 5.6%. 5.2% Wht is the prie-ernings rtio for Sely Corportion for the yer ene 2011?

26 15-26 Test Bnk for Intermeite Aounting, Thirteenth Eition 109. Mys, In. h net inome for 2010 of $2,120,000 n ernings per shre on ommon stok of $5. Inlue in the net inome ws $300,000 of on interest expense relte to its long-term et. The inome tx rte for 2010 ws 30%. Diviens on preferre stok were $400,000. The pyout rtio on ommon stok ws 25%. Wht were the iviens on ommon stok in 2010?. $430,000.. $530,000.. $482,500.. $645, Presente elow is informtion relte to Orener, In.: Common stok 4% Preferre stok Retine ernings (inlues net inome for urrent yer) Net inome for yer Deemer 31, $ 75,000 $ 60, , ,000 90,000 75,000 30,000 32,000 Wht is Orener s rte of return on ommon stok equity for 2011?. 20.0%. 10.7%. 18.2%. 21.3% Use the following informtion for questions 111 n 112. The following t re provie: 10% Cumultive preferre stok, $50 pr Common stok, $10 pr Aitionl pi-in pitl Retine ernings (inlues urrent yer net inome) Net inome Deemer 31, $100,000 $100, ,000 90,000 80,000 65, , ,000 90,000 Aitionl informtion: On My 1, 2011, 3,000 shres of ommon stok were issue. The preferre iviens were not elre uring The mrket prie of the ommon stok ws $50 t Deemer 31, The rte of return on ommon stok equity for 2011 is

27 Stokholers Equity The ook vlue per shre of ommon stok t 12/31/11 is Use the following informtion for questions 113 n 114. Turner Corportion h the following informtion in its finnil sttements for the yer ene 2010 n 2011: Csh iviens for the yer 2011 Net inome for the yer ene 2011 Mrket prie of stok, 12/31/11 Common stokholers equity, 12/31/10 Common stokholers equity, 12/31/11 Outstning shres, 12/31/11 Preferre iviens for the yer ene 2011 $ 15, , ,200,000 2,400, ,000 30, Wht is the pyout rtio for Turner Corportion for the yer ene 2011?. 12.1%. 16.0%. 36.3%. 41.3% 114. Wht is the ook vlue per shre for Turner Corportion for the yer ene 2011?. $ $ $ $24.00 Use the following informtion for questions 115 through 117. Written, In. hs outstning 300,000 shres of $2 pr ommon stok n 60,000 shres of nopr 8% preferre stok with stte vlue of $5. The preferre stok is umultive n nonprtiipting. Diviens hve een pi in every yer exept the pst two yers n the urrent yer. *115. Assuming tht $150,000 will e istriute s ivien in the urrent yer, how muh will the ommon stokholers reeive?. Zero.. $78,000.. $102,000.. $126,000. *116. Assuming tht $63,000 will e istriute s ivien in the urrent yer, how muh will the preferre stokholers reeive?. $21,000.. $24,000.. $48,000.. $63,000.

28 15-28 Test Bnk for Intermeite Aounting, Thirteenth Eition *117. Assuming tht $183,000 will e istriute, n the preferre stok is lso prtiipting, how muh will the ommon stokholers reeive?. $111,000.. $90,000.. $93,000.. $48,000. *118. Yoer, In. hs 50,000 shres of $10 pr vlue ommon stok n 25,000 shres of $10 pr vlue, 6%, umultive, prtiipting preferre stok outstning. Diviens on the preferre stok re one yer in rrers. Assuming tht Yoer wishes to istriute $135,000 s iviens, the ommon stokholers will reeive. $30,000.. $55,000.. $80,000.. $105,000. *119. Mnn Co. hs outstning 50,000 shres of 8% preferre stok with $10 pr vlue n 125,000 shres of $3 pr vlue ommon stok. Diviens hve een pi every yer exept lst yer n the urrent yer. If the preferre stok is umultive n nonprtiipting n $250,000 is istriute, the ommon stokholers will reeive. $0.. $170,000.. $210,000.. $250,000. Multiple Choie Answers Computtionl Ans Ans Ans Ans. Ans Ans. Ans *115. *116. *117. *118. *119. MULTIPLE CHOICE CPA Apte 120. A orportion ws orgnize in Jnury 2007 with uthorize pitl of $10 pr vlue ommon stok. On Ferury 1, 2010, shres were issue t pr for sh. On Mrh 1, 2010, the orportion's ttorney epte 7,000 shres of ommon stok in settlement for legl servies with fir vlue of $90,000. Aitionl pi-in pitl woul inrese on Ferury 1, 2010 Mrh 1, Yes No. Yes Yes. No No. No Yes

29 Stokholers Equity On July 1, 2010, Nll Co. issue 2,500 shres of its $10 pr ommon stok n 5,000 shres of its $10 pr onvertile preferre stok for lump sum of $125,000. At this te Nll's ommon stok ws selling for $24 per shre n the onvertile preferre stok for $18 per shre. The mount of the proees llote to Nll's preferre stok shoul e. $62,500.. $75,000.. $90,000.. $68, Horton Co. ws orgnize on Jnury 2, 2010, with 500,000 uthorize shres of $10 pr vlue ommon stok. During 2010, Horton h the following pitl trnstions: Jnury 5 issue 375,000 shres t $14 per shre. July 27 purhse 25,000 shres t $11 per shre. Novemer 25 sol 15,000 shres of tresury stok t $13 per shre. Horton use the ost metho to reor the purhse of the tresury shres. Wht woul e the lne in the Pi-in Cpitl from Tresury Stok ount t Deemer 31, 2010?. $0.. $15,000.. $30,000.. $45, In 2010, Hos Corp. quire 9,000 shres of its own $1 pr vlue ommon stok t $18 per shre. In 2011, Hos issue 4,000 of these shres t $25 per shre. Hos uses the ost metho to ount for its tresury stok trnstions. Wht ounts n wht mounts shoul Hos reit in 2011 to reor the issune of the 4,000 shres? Tresury Stok $72,000 $72,000 Aitionl Pi-in Cpitl $28,000 $96,000 $68,000 Retine Ernings $70,000 Common Stok $28,000 $4,000 $4,000 At its te of inorportion, Suer, In. issue 100,000 shres of its $10 pr ommon stok t $11 per shre. During the urrent yer, Suer quire 20,000 shres of its ommon stok t prie of $16 per shre n ounte for them y the ost metho. Susequently, these shres were reissue t prie of $12 per shre. There hve een no other issunes or quisitions of its own ommon stok. Wht effet oes the reissune of the stok hve on the following ounts?.... Retine Ernings Derese No effet Derese No effet Aitionl Pi-in Cpitl Derese Derese No effet No effet

30 15-30 Test Bnk for Intermeite Aounting, Thirteenth Eition 125. Frmer Corp. owne 20,000 shres of Eton Corp. purhse in 2007 for $240,000. On Deemer 15, 2010, Frmer elre property ivien of ll of its Eton Corp. shres on the sis of one shre of Eton for every 10 shres of Frmer ommon stok hel y its stokholers. The property ivien ws istriute on Jnury 15, On the elrtion te, the ggregte mrket prie of the Eton shres hel y Frmer ws $400,000. The entry to reor the elrtion of the ivien woul inlue eit to Retine Ernings of. $0.. $160,000.. $240,000.. $400, A orportion elre ivien, portion of whih ws liquiting. How woul this istriution ffet eh of the following?.... Aitionl Pi-in Cpitl Derese Derese No effet No effet Retine Ernings No effet Derese Derese No effet 127. On My 1, 2010, Ziek Corp. elre n issue 10% ommon stok ivien. Prior to this ivien, Ziek h 100,000 shres of $1 pr vlue ommon stok issue n outstning. The fir vlue of Ziek 's ommon stok ws $20 per shre on My 1, As result of this stok ivien, Ziek's totl stokholers' equity. inrese y $200,000.. erese y $200,000.. erese y $10,000.. i not hnge How woul the elrtion n susequent issune of 10% stok ivien y the issuer ffet eh of the following when the mrket vlue of the shres exees the pr vlue of the stok? Aitionl Common Stok Pi-in Cpitl. No effet No effet. No effet Inrese. Inrese No effet. Inrese Inrese

31 Stokholers Equity On Deemer 31, 2010, the stokholers' equity setion of Arnt, In., ws s follows: Common stok, pr vlue $10; uthorize 30,000 shres; issue n outstning 9,000 shres Aitionl pi-in pitl Retine ernings Totl stokholers' equity $ 90, , ,000 $380,000 On Mrh 31, 2011, Arnt elre 10% stok ivien, n oringly 900 itionl shres were issue, when the fir mrket vlue of the stok ws $18 per shre. For the three months ene Mrh 31, 2011, Arnt sustine net loss of $32,000. The lne of Arnt s retine ernings s of Mrh 31, 2011, shoul e. $125,800.. $133,000.. $134,800.. $142,000. *130. At Deemer 31, 2010 n 2011, Plnk Corp. h outstning 2,000 shres of $100 pr vlue 8% umultive preferre stok n 10,000 shres of $10 pr vlue ommon stok. At Deemer 31, 2010, iviens in rrers on the preferre stok were $8,000. Csh iviens elre in 2011 totle $30,000. Wht mounts were pyle on eh lss of stok?.... Preferre Stok $16,000 $22,000 $24,000 $30,000 Common Stok $14,000 $8,000 $6,000 $0 Multiple Choie Answers CPA Apte Ans. Ans. Ans. Ans. Ans. Ans *130. DERIVATIONS Computtionl No. Answer Derivtion 71. $4,300,000 + $400,000 + $550,000 + $2,000,000 + $1,500,000 $150,000 = $8,600, $4,300,000 + $550,000 = $4,850, (10,000 $25) + (15,000 $20) = $550,000 ($250,000 $550,000) $480,000 = $218, (4,000 $25) + (6,000 $20) = $220,000 ($120,000 $220,000) $192,000 = $104, (5,000 $18) + $100,000 = $190,000.

32 15-32 Test Bnk for Intermeite Aounting, Thirteenth Eition 76. [(6,000 $25) [(6,000 $25) + (9,000 $20)] $288,000 = $130,909. ] 77. [(7,500 $20) [(5,000 $25) + (7,500 $20)] $240,000 = $130, ($60 $52) 20,000 = $160, ,000 $15 = $180, ,000 $20 = $60,000; 3,000 $7 = $21, ,000 $15 = $60,000; 4,000 $4 = $16, $900,000 + (2,000 $5) (500 $10) = $905, (675,000 $4) + (90,000 $7) = $3,330, $900,000 + (3,600 $5) (2,400 $4) = $908, $1,650,000 (3,000 $28) (3,000 $35) + (1,800 $30) + $450,000 = $1,965, ,000 $55 = $1,100, ,000 $50.06 = $6,000 ($6,000 $5,000) + $6,000 = $7, ,000 $ = $25,000 ($45,000 2) ($25,000 3) = $15, ,000 $ = $42,000 $160,000 ($42,000 2) = $76, ($90,000 $10) $14 = $126,000 [$14 ($90,000 10,000)] 9,000 = $45,000 $126,000 $45,000 = $81, ($270,000 $10) $14 = $378,000 [$14 ($270,000 30,000) ] 27,000 = $135,000 $378,000 $135,000 = $243, (900,000 $7) [($7 $5) 900,000] = $4,500, (180,000 10) $14 = $252,000 $252,000 [$252,000 (180,000 18/20)] = $162, (5,000 $63) = $315,000 $315,000 ($315,000 $218,000) = $218,000. ]

33 Stokholers Equity , $30 = $1,050,000 $1,050,000 + (350, $.50) = $1,242, (60,000 $50) + $3,000,000 = $6,000, $75,000 $10,000 (1,500 $6) = $56, , $35 = $840, , $20 = $240, , $8 = $80, $200,000 + $100,000 $60,000 (3,000 $20) = $180, ($420, $36) + ($420, $.60) = $1,020, $8,000 ($93,000 $15,000) = 10.3% $1,800, ,000 = $ $150,000 + $75,000 $45,000 (1,500 $30) = $135, (560, $48) + (560, $.60) = $1,696, ($72,000 $10,000) [($1,000,000 + $1,200,000) ] = 5.6% ($72,000 $10,000) 100,000 = $.62. $12.62 = X =.25, X = $430,000. ($2,120,000 $400,000) $30, 000 (.04 $350, 000 ) ( $60, $75, 000 ) + ( $75, $90, 000 ) 2 =.107 = 10.7%. $90, 000 ( $100, ) ( $120, $80, $240, 000 $10, 000 ) + ( $90, $65, $215, 000 ) 2 = $ $120,000 + $80,000 + (240,000 $10,000) = $ ,000 $15,000 ($124,000 $30,000) = 16.0%.

34 15-34 Test Bnk for Intermeite Aounting, Thirteenth Eition 114. $2,400, ,000 = $ *115. $150,000 (60,000 $5.08 3) = $78,000. * ,000 $ = $72,000 > $63,000. *117. 8% $600,000 = $48,000 7%* $600,000 = 42,000 $90,000 (urrent yer) (prtiipting) *$300,000 8% 3 =$ 72,000 $600,000 8% = 48,000 $120,000 $183,000 $120,000 = 7%. $600,000 + $300,000 *118. (preferre iviens) (ommon urrent iviens) Common Stok $500,000 6% = $30,000 (urrent yer) $500,000 10%* = 50,000 (prtiipting) $80,000 *$135,000 $30,000 ($250,000 6% 2) = $75,000 $75,000 = 10%. $750,000 *119. $250,000 ($500,000 8% 2) = $170,000. DERIVATIONS CPA Apte No. Answer Derivtion 120. Coneptul ($24 2,500) + ($18 5,000) = $150,000. $90,000 $125,000 = $75,000. $150, ,000 $2 = $30, (4,000 $18) = $72,000; (4,000 $7) = $28, Coneptul $400,000 (mrket vlue).

35 Stokholers Equity 126. Coneptul Coneptul Coneptul $174,000 $32,000 (900 $18) = $125,800. *130. ($200,000.08) + $8,000 = $24,000 $30,000 $24,000 = $6, EXERCISES Ex Lump sum issune of stok. Prker Corportion hs issue 2,000 shres of ommon stok n 400 shres of preferre stok for lump sum of $72,000 sh. Instrutions () Give the entry for the issune ssuming the pr vlue of the ommon ws $5 n the mrket vlue $30, n the pr vlue of the preferre ws $40 n the mrket vlue $50. (Eh vlution is on per shre sis n there re rey mrkets for eh stok.) () Give the entry for the issune ssuming the sme fts s () ove exept the preferre stok hs no rey mrket n the ommon stok hs mrket vlue of $25 per shre. Solution () Csh... Common Stok... Pi-in Cpitl in Exess of Pr Common... Preferre Stok... Pi-in Cpitl in Exess of Pr Preferre... (ommon $30 2,000 $60,000 preferre $ ,000 $80,000 mrket vlue 60/80 $72,000 = 20/80 $72,000 = 72,000 10,000 44,000 16,000 2,000 $54,000 ommon 18,000 preferre $72,000) () Csh... Common Stok... Pi-in Cpitl in Exess of Pr Common... Preferre Stok... Pi-in Cpitl in Exess of Pr Preferre... 72,000 10,000 40,000 16,000 6,000

36 15-36 Test Bnk for Intermeite Aounting, Thirteenth Eition Ex Tresury stok. For numerous resons, orportion my require shres of its own pitl stok. When ompny purhses tresury stok, it usully ounts for the stok using the ost metho. Instrutions Explin how ompny woul ount for eh of the following: 1. Purhse of shres t prie less thn pr vlue. 2. Susequent resle of tresury shres t prie less thn purhse prie, ut more thn pr vlue. 3. Susequent resle of tresury shres t prie greter thn oth purhse prie n pr vlue. 4. Effet on net inome. Solution Tresury stok is eite for the purhse prie of the shres even though the purhse prie is less thn pr vlue. 2. Tresury stok is reite for the originl ost (purhse prie) of the shres, n the exess of the originl ost (purhse prie) over the sles prie first is eite to pi-in pitl from tresury stok from erlier sles of tresury stok n ny reminer then is eite to retine ernings. 3. Tresury stok is reite for the originl ost (purhse prie) of the shres, n the exess of the sles prie over the originl ost (purhse prie) is reite to pi-in pitl from tresury stok. 4. There is no effet on net inome s result of tresury stok trnstions. Ex Tresury stok. Agler Corportion's lne sheet reporte the following: Cpitl stok outstning, 5,000 shres, pr $30 per shre Pi-in pitl in exess of pr Retine ernings $150,000 80, ,000 The following trnstions ourre this yer: () Purhse 120 shres of pitl stok to e hel s tresury stok, pying $60 per shre. () Sol 90 of the shres of tresury stok t $65 per shre. () Sol the remining shres of tresury stok t $50 per shre. Instrutions Prepre the journl entry for these trnstions uner the ost metho of ounting for tresury stok.

37 Stokholers Equity Solution () Tresury Stok... Csh... 7,200 () Csh... Tresury Stok... Pi-in Cpitl from Tresury Stok... 5,850 () Csh... Pi-in Cpitl from Tresury Stok... Tresury Stok... 1, ,200 5, ,800 Ex Tresury stok. Ellison Compny's lne sheet shows: Common stok, $20 pr Pi-in pitl in exess of pr Retine ernings $3,000,000 1,050, ,000 Instrutions Reor the following trnstions y the ost metho. () Bought 5,000 shres of its ommon stok t $29 shre. () Sol 2,500 tresury shres t $30 shre. () Sol 1,000 shres of tresury stok t $26 shre. Solution () () () Tresury Stok... Csh ,000 Csh... Tresury Stok... Pi-in Cpitl from Tresury Stok... 75,000 Csh... Pi-in Cpitl from Tresury Stok... Retine Ernings... Tresury Stok... 26,000 2, ,000 72,500 2,500 29,000

38 15-38 Test Bnk for Intermeite Aounting, Thirteenth Eition Ex Tresury stok. In 2010, Mori Co. issue 200,000 of its 500,000 uthorize shres of $10 pr vlue ommon stok t $35 per shre. In Jnury, 2011, Mori repurhse 15,000 shres t $30 per shre. Assume these re the only stok trnstions the ompny hs ever h. Instrutions () Wht re the two methos of ounting for tresury stok? () Prepre the journl entry to reor the purhse of tresury stok y the ost metho. () 5,000 shres of tresury stok re reissue t $33 per shre. Prepre the journl entry to reor the reissune y the ost metho. Solution () The two methos of ounting for tresury stok re the ost metho n the pr vlue metho. () Tresury Stok... Csh ,000 Csh... Pi-in Cpitl from Tresury Stok... Tresury Stok ,000 () 450,000 15, ,000 Ex Stokholers Equity. Inite the effet of eh of the following trnstions on totl stokholers' equity y pling n "X" in the pproprite olumn. Inrese Derese No Effet 1. Tresury stok is resol t more thn ost. 2. Operting loss for the perio. 3. Retirement of ons pyle t more thn ook vlue. 4. Delrtion of stok ivien. 5. Aquisition of mhinery for ommon stok. 6. Conversion of ons pyle into ommon stok. 7. Not elring ivien on umultive preferre stok. 8. Delrtion of sh ivien. 9. Pyment of sh ivien.

39 Stokholers Equity Solution Inrese 1. Tresury stok is resol t more thn ost. Derese X 2. Operting loss for the perio. X 3. Retirement of ons pyle t more thn ook vlue. X 4. Delrtion of stok ivien. X 5. Aquisition of mhinery for ommon stok. X 6. Conversion of ons pyle into ommon stok. X 7. Not elring ivien on umultive preferre stok. 8. Delrtion of sh ivien. 9. Pyment of sh ivien. No Effet X X X Ex Stok iviens. Desrie the journl entry for stok ivien on ommon stok (whih hs pr vlue). Solution A stok ivien results in the trnsfer from retine ernings to pi-in pitl of n mount equl to the fir vlue of eh shre, if the ivien is less thn 20-25%, or pr vlue of eh shre, if the ivien is greter thn 20-25%. Retine Ernings is eite for the totl mount trnsferre, Common Stok Divien Distriutle is reite for the totl pr vlue of the shres, n, for smll stok ivien, the exess of mrket vlue over pr vlue is reite to Pi-in Cpitl in Exess of Pr.

40 15-40 Test Bnk for Intermeite Aounting, Thirteenth Eition Ex Stok iviens n stok splits. Inite the prinipl effets of stok ivien versus stok split s they ffet the issuing orportion. Respon in the spes s follows: "C" for hnge; "NC" for no hnge. Stok Divien Stok Split Numer of Shres Outstning Pr Vlue per Shre Totl Pr Outstning Retine Ernings Totl Stokholers' Equity Composition of Stokholers' Equity Stok Divien C NC C C NC C Stok Split C C NC NC NC NC Solution Numer of Shres Outstning Pr Vlue per Shre Totl Pr Outstning Retine Ernings Totl Stokholers' Equity Composition of Stokholers' Equity Ex Computtion of selete finnil rtios. The following informtion pertins to Prsons Co.: Preferre stok, umultive: Pr per shre Divien rte Shres outstning Diviens in rrers Common stok: Pr per shre Shres issue Diviens pi per shre Mrket prie per shre Aitionl pi-in pitl Unpproprite retine ernings (fter losing) Retine ernings pproprite for ontingenies Common tresury stok: Numer of shres Totl ost Net inome $100 8% 5,000 none $10 60,000 $2.70 $48.00 $200,000 $135,000 $150,000 5,000 $125,000 $370,000

41 Stokholers Equity Instrutions Compute (ssume no hnges in lnes uring the pst yer): () Totl mount of stokholers equity in the lne sheet () Ernings per shre of ommon stok () Book vlue per shre of ommon stok () Pyout rtio of ommon stok (e) Return on ommon stok equity Solution () (5,000 $100) + (60,000 $10) + $200,000 + $135,000 + $150,000 $125,000 = $1,460,000. () [$370,000 (5,000 $100 8%)] (60,000 5,000) = 330,000 55,000 = $6.00 per shre. () ($1,460,000 $500,000) (60,000 5,000) = $960,000 55,000 = $17.45 per shre. Solution (ont.) () $2.70 $6 = 45% or [($ ,000) ($370,000 $40,000)]. (e) ($370,000 $40,000) ($1,460,000 $500,000) = 34.4%. *Ex Diviens on preferre stok. The stokholers' equity setion of Lemy Corportion shows the following on Deemer 31, 2011: Preferre stok 6%, $100 pr, 4,000 shres outstning Common stok $10 pr, 60,000 shres outstning Pi-in pitl in exess of pr Retine ernings Totl stokholers' equity $ 400, , , ,000 $1,314,000 Instrutions Assuming tht ll of the ompny's retine ernings re to e pi out in iviens on 12/31/11 n tht preferre iviens were lst pi on 12/31/09, show how muh the preferre n ommon stokholers shoul reeive if the preferre stok is umultive n fully prtiipting. *Solution Diviens in rrers (6% of $400,000) Current yer's iviens Prtiipting ivien (3%) [($30,000 $1,000,000) x $400,000] Preferre $24,000 24,000 Common $ 36,000 Totl $ 24,000 60,000 12,000 $60,000 18,000 $54,000 30,000 $114,000

42 15-42 Test Bnk for Intermeite Aounting, Thirteenth Eition *Ex Diviens on preferre stok. In eh of the following inepenent ses, it is ssume tht the orportion hs $400,000 of 6% preferre stok n $1,600,000 of ommon stok outstning, eh hving pr vlue of $10. No iviens hve een elre for 2009 n () As of 12/31/11, it is esire to istriute $250,000 in iviens. How muh will the preferre stokholers reeive if their stok is umultive n nonprtiipting? () As of 12/31/11, it is esire to istriute $400,000 in iviens. How muh will the preferre stokholers reeive if their stok is umultive n prtiipting up to 11% in totl? () On 12/31/11, the preferre stokholers reeive $120,000 ivien on their stok whih is umultive n fully prtiipting. How muh money ws istriute in totl for iviens uring 2011? *Solution () $72,000 ($400,000 x.06 x 3 yrs.). () $92,000 ($400,000 x.06 x 3 yrs.) + [$400,000 x ( )]. () $408,000 ($288,000* to ommon n $120,000 to preferre). * ($1,600,000 x.06) + [($120,000 - $72,000) $400,000) x $1,600,000]. PROBLEMS Pr Equity trnstions. Presente elow is informtion relte to Wyrik Compny: 1. The ompny is grnte hrter tht uthorizes issune of 15,000 shres of $100 pr vlue preferre stok n 40,000 shres of no-pr ommon stok. 2. 8,000 shres of ommon stok re issue to the founers of the orportion for ln vlue y the or of iretors t $300,000. The or estlishes stte vlue of $5 shre for the ommon stok. 3. 5,000 shres of preferre stok re sol for sh t $120 per shre. 4. The ompny issues 100 shres of ommon stok to its ttorneys for osts ssoite with strting the ompny. At tht time, the ommon stok ws selling t $60 per shre. Instrutions Prepre the generl journl entries neessry to reor these trnstions. Solution No entry neessry. 2. Ln... Common Stok... Pi-in Cpitl in Exess of Stte Vlue ,000 40, ,000

43 Stokholers Equity 3. Csh... Preferre Stok... Pi-in Cpitl in Exess of Pr Preferre Stok , Orgniztion Expense... Common Stok... Pi-in Cpitl in Exess of Stte Vlue... 6, , , ,500 Pr Tresury stok trnstions. The originl sle of the $50 pr vlue ommon shres of Gry Compny ws reore s follows: Csh ,000 Common Stok ,000 Pi-in Cpitl in Exess of Pr... 40,000 Instrutions Reor the tresury stok trnstions (given elow) uner the ost metho: Trnstions: () Bought 300 shres of ommon stok s tresury shres t $62. () Sol 80 shres of tresury stok t $60. () Sol 40 tresury shres t $68. Solution () () () Tresury Stok... Csh... 18,600 Csh... Retine Ernings... Tresury Stok... 4, Csh... Pi-in Cpitl from Tresury Stok... Tresury Stok... 2,720 18,600 4, ,480 Pr Stok iviens. The stokholers' equity setion of Benton Corportion's lne sheet s of Deemer 31, 2010 is s follows: Stokholers' Equity Common stok, $5 pr vlue; uthorize, 2,000,000 shres; issue, 400,000 shres $2,000,000 Pi-in pitl in exess of pr 850,000 Retine ernings 3,000,000 $5,850,000 The following events ourre uring 2011:

44 15-44 Test Bnk for Intermeite Aounting, Thirteenth Eition 1. Jn. 5 10,000 shres of uthorize n unissue ommon stok were sol for $8 per shre. 2. Jn. 16 Delre sh ivien of 20 ents per shre, pyle Ferury 15 to stokholers of reor on Ferury Fe ,000 shres of uthorize n unissue ommon stok were sol for $12 per shre. 4. Mrh 1 A 30% stok ivien ws elre n issue. Mrket vlue per shre is urrently $ April 1 A two-for-one split ws rrie out. The pr vlue of the stok ws to e reue to $2.50 per shre. Mrket vlue on Mrh 31 ws $18 per shre. 6. July 1 A 15% stok ivien ws elre n issue. Mrket vlue is urrently $10 per shre. 7. Aug. 1 A sh ivien of 20 ents per shre ws elre, pyle Septemer 1 to stokholers of reor on August 21. Instrutions Enter the ove events into the following work sheet showing how eh event ffets the olumn. Event No. 1 will serve s n exmple. Common Stok No. of Totl Shres Issue Pr Vlue Beginning Blne 1/1/11 400,000 $2,000,000 Event #1 Jn. 5 10,000 50,000 Blne 410,000 $2,050,000 Event # 2 Jn. 16 (n events 3 through 7) Pi-in Cpitl In Exess of Pr Retine Ernings $850,000 $3,000,000 30,000-0$880,000 $3,000,000

45 Stokholers Equity Solution Event #2 Jn (82,000) Blne 410,000 $2,050,000 $880,000 $2,918,000 #3 Fe , , ,000-0 Blne 430,000 $2,150,000 $1,020,000 $2,918,000 #4 Mrh 1 129, ,000-0(645,000) Blne 559,000 $2,795,000 $1,020,000 $2,273,000 #5 April 1 559, Blne 1,118,000 $2,795,000 $1,020,000 $2,273,000 #6 July 1 167, ,250 1,257,750 (1,677,000) Blne 1,285,700 $3,214,250 $2,277,750 $596,000 #7 Aug (257,140) Blne 1,285,700 $3,214,250 $2,277,750 $338,860

46 15-46 Test Bnk for Intermeite Aounting, Thirteenth Eition Pr Equity trnstions. Foley Corportion hs the following pitl struture t the eginning of the yer: 6% Preferre stok, $50 pr vlue, 20,000 shres uthorize, 6,000 shres issue n outstning Common stok, $10 pr vlue, 60,000 shres uthorize, 40,000 shres issue n outstning Pi-in pitl in exess of pr $ 300, , ,000 Totl pi-in pitl Retine ernings Totl stokholers' equity 810, ,000 $1,250,000 Instrutions () Reor the following trnstions whih ourre onseutively (show ll lultions). 1. A totl sh ivien of $90,000 ws elre n pyle to stokholers of reor. Reor iviens pyle on ommon n preferre stok in seprte ounts. 2. A 10% ommon stok ivien ws elre. The verge mrket vlue of the ommon stok is $18 shre. 3. Assume tht net inome for the yer ws $150,000 (reor the losing entry) n the or of iretors pproprite $70,000 of retine ernings for plnt expnsion. () Construt the stokholers' equity setion inorporting ll the ove informtion. Solution () 1. Retine Ernings... Diviens Pyle Preferre ($300,000.06)... Diviens Pyle Common ,000 18,000 72,000 40,000 shres 10% 4,000 shres s stok ivien $18 $72,000 totl ivien Retine Ernings... Common Stok Divien Distriutle... Pi-in Cpitl in Exess of Pr... 72, Inome Summry... Retine Ernings ,000 Retine Ernings... Retine Ernings Approprite for Plnt Expnsion.. 70,000 40,000 32, ,000 70,000

47 Stokholers Equity Solution (ont.) () Stokholers' equity 6% Preferre stok, $50 pr vlue, 20,000 shres uthorize, 6,000 shres issue n outstning Common stok, $10 pr vlue, 60,000 shres uthorize, 40,000 shres issue n outstning Common stok ivien istriutle Pi-in pitl in exess of pr Totl pi-in pitl Retine ernings unpproprite* $358,000 Approprite for plnt expnsion 70,000 Totl retine ernings Totl stokholers' equity $ 300, ,000 40, , , ,000 $1,310,000 *$440,000 $90,000 $72,000 + $150,000 $70,000 = $358,000 *Pr Diviens on preferre n ommon stok. Rensing, In., hs $800,000 of 8% preferre stok n $1,200,000 of ommon stok outstning, eh hving pr vlue of $10 per shre. No iviens hve een pi or elre uring 2009 n As of Deemer 31, 2011, it is esire to istriute $488,000 in iviens. Instrutions How muh will the preferre n ommon stokholers reeive uner eh of the following ssumptions: () The preferre is nonumultive n nonprtiipting. () The preferre is umultive n nonprtiipting. () The preferre is umultive n fully prtiipting. () The preferre is umultive n prtiipting to 12% totl. *Solution () Current yer's ivien (8% of $800,000) Reminer to ommon Preferre $ 64,000 $ 64,000 () () Totl $ 64, ,000 $488,000 $192,000 Common $ 296,000 $296,000 Totl $128,000 64, ,000 $488,000 Preferre Diviens in rrers, 8% of $800,000 for two yers $128,000 Current yer's ivien 64,000 Prtiipting ivien 10% ($200,000 $2,000,000) 80,000 $272,000 Common $ 96, ,000 $216,000 Totl $128, , ,000 $488,000 Diviens in rrers, 8% of $800,000 for two yers Current yer's ivien Reminer to ommon Preferre $128,000 64,000 Common $ 424,000 $424,000

48 15-48 Test Bnk for Intermeite Aounting, Thirteenth Eition *Solution (ont.) () Diviens in rrers, 8% of $800,000 for two yers Current yer's ivien Prtiipting ivien (4%) Reminer to ommon Preferre $128,000 64,000 32,000 $224,000 Common $ 96,000 48, ,000 $264,000 Totl $128, ,000 80, ,000 $488,000

49 Stokholers Equity IFRS QUESTIONS True/Flse 1. In the Unite Sttes, like mny other ountries, nks re mjor reitors s well s the lrgest investors. 2. The igaap sttement of reognize inome n expenses is ientil to the U.S. GAAP sttement of retine ernings eginning lne retine ernings, plus net inome, less iviens, equls ening lne retine ernings. 3. When the sttement of reognize inome n expenses is utilize the requirement for itionl note islosure is reue. 4. Uner igaap ompline requirements the U.S. GAAP formtte inome sttement nee not e reple with the igaap sttement of reognize inome n expenses. 5. Uner igaap ompline requirements the revlution surplus is not onsiere ontriute pitl. Answers to True/Flse: 1. Flse 2. Flse 3. Flse 4. True 5. True Multiple Choie 1. The ounting for tresury stok retirements uner igaap. is to hrge the entire mount to pi-in pitl.. my hve the exess hrge to pi-in pitl, epening on the originl trnstion relte to the issune of the stok.. is to hrge the exess of the ost of tresury stok over pr vlue to retine ernings.. is to llote the ifferene etween pi-in pitl n retine ernings. 2. The Revlution Surplus of igaap is. similr to U.S. GAAP in tht it llows oth inreses n ereses in vlution.. similr to U.S. GAAP in tht it only llows for the erese in vlution.. similr to U.S. GAAP in tht it only llows for the inrese in vlution.. ifferent thn U.S. GAAP in tht it llows the inrese in vlution.

50 15-50 Test Bnk for Intermeite Aounting, Thirteenth Eition 3. The igaap sttement of reognize inome n expenses. oes not reognize hrges to equity suh s revlution surplus vlues.. is require report uner igaap reporting requirements.. reports the items tht were hrge iretly to equity suh s revlution surplus.. is similr to the U.S. GAAP inome sttement in tht it only reports revenues n expenses of the perio. 4. Uner igaap ompline requirements the Revlution Surplus is. only utilize to reor the hnges in epreile items plnt n equipment.. onsiere s revenue when utilizing the U.S. GAAP formtte inome sttement.. utilize to reor the hnges in property, plnt, n equipment.. reporte s ontriute pitl. 5. The urrent projet of the IASB n the FASB relte to finnil sttement presenttion inites. tht the igaap sttement of reognize inome n expenses will most likely e opte y the FASB s U.S. requirement in the ner future.. tht the igaap sttement of reognize inome n expenses will proly e eliminte.. tht the U.S. GAAP stnr for reporting omprehensive inome will most likely e opte y the IASB for igaap.. tht hyri finnil instruments re uneptle. Answers to Multiple Choie: Short Answer 1. Briefly esrie some of the similrities n ifferenes etween U.S. GAAP n igaap with respet to the ounting for stokholers equity. 1. Key similrities etween igaap n U.S. GAAP for trnstions relte to stokholers equity pertin to (1) issune of shres, (2) purhse of tresury stok, (3) elrtion n pyment of iviens, (4) the ounting for strt up osts tht is, they shoul e expense s inurre, (5) the osts ssoite with issuing stok reue the proees from the issune n reue pi in pitl, n (6) the ounting for pr, no pr n no pr stok with stte vlue. Mjor ifferenes relte to terminology use, introution of items suh s revlution surplus, n presenttion of stokholer equity informtion. In ition, the ounting for tresury stok retirements iffers etween igaap n U.S. GAAP. Uner U.S. GAAP ompny hs the option of hrging the exess of the ost of tresury stok over pr vlue to (1) retine ernings, (2) llote the ifferene etween pi-in pitl n retine ernings, or (3) hrge the entire mount to pi-in pitl. Uner igaap, the exess my hve to e hrge to pi-in pitl, epening on the originl trnstion relte to the issune of the stok. An igaap/u.s. GAAP ifferene reltes to the ount Revlution

51 Stokholers Equity Surplus. Revlution surplus rises uner igaap euse ompnies re permitte to revlue their property, plnt n equipment to fir vlue uner ertin irumstnes. This ount is prt of generl reserves uner igaap n is not onsiere ontriute pitl. While oth igaap n U.S. GAAP onsier the sttement of stokholers equity primry finnil sttement, uner igaap, ompny hs the option of prepring sttement of stokholers equity similr to U.S. GAAP or prepring sttement of reognize inome n expense (SoRIE). The sttement of SoRIE reports the items tht were hrge iretly to equity suh s revlution surplus n then s the net inome for the perio to rrive t totl reognize inome n expense. In this sitution, itionl note islosure is require to provie reonilitions of other equity items. 2. Briefly isuss the implitions of the finnil sttement presenttion projet for the reporting of stokholers equity. 2. It is likely tht the sttement of stokholers equity n its presenttion will e exmine losely in the finnil sttement presenttion projet. The sttement of reognize inome n expense now permitte uner igaap will proly e eliminte. In ition the options of how to present other omprehensive inome uner U.S. GAAP will hnge in ny onverge stnr in this re. Also, the FASB hs een working on stnr tht will likely onverge to igaap in the re of hyri finnil instruments.