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Chapter 15: Q15-5ISTQ (page 831)
Under IFRS, a purchase by a company of its own shares results in:
(a) an increase in treasury shares.
(b) a decrease in assets.
(c) a decrease in equity.
(d) All of the above.
Answer
All of the options given are correct.
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How are restrictions of retained earnings reported?
(Stockholders’ Equity Section) Bruno Corporation’s post-closing trial balance at December 31, 2017, is shown as follows.
BRUNO CORPORATION POST-CLOSING TRIAL BALANCE DECEMBER 31, 2017 | ||
Dr. | Cr. | |
Accounts payable | \( 310,000 | |
Accounts receivable | \) 480,000 | |
Accumulated depreciation—buildings | 185,000 | |
Additional paid-in capital in excess | ||
of par—common | 1,300,000 | |
From treasury stock | 160,000 | |
Allowance for doubtful accounts | 30,000 | |
Bonds payable | 300,000 | |
Buildings | 1,450,000 | |
Cash | 190,000 | |
Common stock (\(1 par) | 200,000 | |
Dividends payable (preferred stock—cash) | 4,000 | |
Inventory | 560,000 | |
Land | 400,000 | |
Preferred stock (\)50 par) | 500,000 | |
Prepaid expenses | 40,000 | |
Retained earnings | 301,000 | |
Treasury stock (common at cost) | 170,000 | |
Totals | \(3,290,000 | \)3,290,000 |
At December 31, 2017, Bruno had the following number of common and preferred shares. | ||
Common | Preferred | |
Authorized | 600,000 | 60,000 |
Issued | 200,000 | 10,000 |
Outstanding | 190,000 | 10,000 |
The dividends on preferred stock are \(4 cumulative. In addition, the preferred stock has a preference in liquidation of \)50 per share.
Instructions
Prepare the stockholders’ equity section of Bruno’s balance sheet at December 31, 2017.
Mary Tokar is comparing a GAAP-based company to a company that uses IFRS. Both companies report equity investments. The IFRS company reports unrealized losses on these investments under the heading “Reserves” in its equity section. However, Mary can find no similar heading in the GAAP-based company financial statements. Can Mary conclude that the GAAP-based company has no unrealized gains or losses on its non-trading equity investments? Explain.
(Dividend Entries) The following data were taken from the balancesheet accounts of Masefield Corporation on December 31, 2016.
Current assets \(540,000
Debt investments (trading) 624,000
Common stock (par value \)10) 500,000
Paid-in capital in excess of par 150,000
Retained earnings 840,000
Instructions
Prepare the required journal entries for the following unrelated items.
(Equity Items on the Balance Sheet) The following are selected transactions that may affect stockholders’ equity.
Instructions
In the following table, indicate the effect each of the nine transactions has on the financial statement elements listed. Use the following code: I = Increase, D = Decrease, NE = No effect.
Item | Asset | Liabilities | Stockholders’ Equity | Paid-in Capital | Retained Earnings | Net Income |
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