Chapter 15: Question 1IFRS (page 825)

Where can authoritative IFRS guidance related to stockholders’ equity be found?

Short Answer

Expert verified

Authoritative IFRS guidance are IAS 1, IAS 32, and IAS 39

Step by step solution

01

Meaning of IFRS

International Financial Reporting Standards (IFRS) are accounting measures issued by the International Accounting Standards Board (IASB), intended to provide a common accounting bid to increase straightforwardness within the introduction of monetary data.

02

Discussing Authorities IFRS guidance related to stockholders’ equity

The essential IFRS reporting guidelines relating to stockholders' equity are

  1. IAS 1 (Presentation of Financial Statements),
  2. IAS 32 (Financial Instruments: Presentation) and
  3. IAS 39 (Financial Instruments: Recognition and Measurement).

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Most popular questions from this chapter

Woolford Inc. declared a cash dividend of $1.00 per share on its 2 million outstanding shares. The dividend was declared on August 1, payable on September 9 to all stockholders of record on August 15. Prepare all journal entries necessary on those three dates.

(Comparison of Alternative Forms of Financing) Shown below is the liabilities and stockholders’ equity section of the balance sheet for Jana Kingston Company and Mary Ann Benson Company. Each has assets totaling \(4,200,000.

Jana Kingston Co.

Current liabilities

\) 300,000

Long-term debt, 10%

1,200,000

Common stock (\(20 par)

2,000,000

Retained earnings (Cash dividends, \)328,000)

700,000

\(4,200,000

Mary Ann Benson Co.

Current liabilities

\) 600,000

Common stock (\(20 par)

2,900,000

Retained earnings (Cash dividends, \)328,000)

700,000

\(4,200,000

For the year, each company has earned the same income before interest and taxes.

Jana Kingston Co.

Mary Ann Benson Co.

Income before interest and taxes

\)1,200,000

\(1,200,000

Interest expense

120,000

0

1,080,000

1,200,000

Income taxes (45%

486,000

540,000

Net income

\) 594,000

\( 660,000

At year end, the market price of Kingston’s stock was \)101 per share, and Benson’s was $63.50.

Instructions

  1. Which company is more profitable in terms of return on total assets?
  2. Which company is more profitable in terms of return on common stockholders’ equity?
  3. Which company has the greater net income per share of stock? Neither company issued or reacquired shares during the year.
  4. From the point of view of net income, is it advantageous to the stockholders of Jana Kingston Co. to have the long-term debt outstanding? Why?
  5. What is the book value per share for each company?

What are the different bases for stock valuation when assets other than cash are received for issued shares of stock?

Describe the accounting entry for a stock dividend, if any. Describe the accounting entry for a stock split, if any.

Dividends are sometimes said to have been paid “out of retained earnings.” What is the error, if any, in that statement?

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