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Chapter 15: Question 7IFRS (page 825)

Kaymer Corporation issued 300 shares of \(10 par value ordinary shares for \)4,500. Prepare Kaymer’s journal entry.

Short Answer

Expert verified

The total value of share capital – ordinary is $3,000.

Step by step solution

01

Meaning of Ordinary Shares

Ordinary shares are the form of stock issued by a corporation and reflect a portion of the company's ownership. They're also known as common stock because they show how much a shareholder holds the stake in the company.

02

Preparing Journal Entries

Date

Particular

Debit ($)

Credit ($)

Cash

4,500

Share Capital-ordinary

3,000

Share Premium-Ordinary

1,500

Working Notes:

Sharecapital-Ordinary=Shareissued×Parvalue=300×$10=$3,000

Sharepremium-Ordinary=Cashreceived-Sharecapital-Ordinary=$4,500-$3,000=$1,500

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Most popular questions from this chapter

(Preferred Stock Dividends) Cajun Company has outstanding 2,500 shares of \(100 par, 6% preferred stock and 15,000 shares of \)10 par value common. The following schedule shows the amount of dividends paid out over the last 4 years.

Instructions

Allocate the dividends to each type of stock under assumptions (a) and (b). Express your answers in per share amounts using the format shown below

Assumptions

(a)

Preferred, noncumulative

And nonparticipating

(b)

Preferred, cumulative, and fully participating

Year

Paid-out

Preferred

Common

Preferred

Common

2012

\(13,000

2013

\)26,000

2014

\(57,000

2015

\)76,000

(Cash Dividend and Liquidating Dividend) Lotoya Davis Corporation has 10 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 80 cents per share cash dividend to stockholders of record as of June 14, payable June 3

Instructions

  1. Prepare the journal entry for each of the dates above, assuming the dividend represents a distribution of earnings.
  2. How would the entry differ if the dividend were a liquidating dividend?

Why is a preemptive right important?

(Equity Items on the Balance Sheet) The following are selected transactions that may affect stockholders’ equity.

  1. Recorded accrued interest earned on a note receivable.
  2. Declared a cash dividend.
  3. Declared and distributed a stock split.
  4. Approved a retained earnings restriction.
  5. Recorded the expiration of insurance coverage that was previously recorded as prepaid insurance.
  6. Paid the cash dividend declared in item 2 above.
  7. Recorded accrued interest expense on a note payable.
  8. Declared a stock dividend.
  9. Distributed the stock dividend declared in item 8.

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

Stock splits and stock dividends may be used by a corporation to change the number of shares of its stock outstanding.

  1. What is meant by a stock split effected in the form of a dividend?
  2. From an accounting viewpoint, explain how the stock split effected in the form of a dividend differs from an ordinary stock dividend.
  3. How should a stock dividend that has been declared but not yet issued be classified in a balance sheet? Why?
See all solutions

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