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Chapter 15: Question 8IFRS (page 831)

Wilco Corporation has the following account balances on December 31, 2017.

Share capital—ordinary, \(5 par value \) 510,000

Treasury shares 90,000

Retained earnings 2,340,000

Share premium—ordinary 1,320,000

Instructions

Prepare Wilco’s December 31, 2017, equity section.

Short Answer

Expert verified

Total Equity of Wilco Corporation is $4,080,000.

Step by step solution

01

Meaning of Shareholders Equity

Stockholders' equity is the difference between the assets of the organization and external liabilities at a specific date. The primary source is money initially and is therefore contributed within the company through share offerings. The second source includes the retained earnings(RE) collected by the company over time through its operations.

02

Preparing Wilco Corporation Equity section

WILCO CORPORATION

EQUITY

December 31, 2017


Share capital-ordinary,$5 par value

$ 510,000

Share Premium-Ordinary

1,320,000

Retained Earnings

2,340,000

Treasury Shares

(90,000)

Total Equity

$4,080,000

Working Notes:

Calculation of share capital

Sharecapital=Shareissued×Parvalue=102,000×$5=$510,000

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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.

(Preemptive Rights and Dilution of Ownership) Wallace Computer Company is a small, closely-held corporation. Eighty percent of the stock is held by Derek Wallace, president. Of the remainder, 10% is held by members of his family and 10% by Kathy Baker, a former officer who is now retired. The balance sheet of the company at June 30, 2017, was substantially as shown below.

Asset

Current assets \(22,000

Equipment (net) 450,000

\)472,000

Liabilities and Stockholders’ Equity

Current liabilities \(50,000

Common stock 250,000

Retained earnings 172,000

\)472,000

Additional authorized common stock of \(300,000 par value had never been issued. To strengthen the cash position of the company, Wallace issued common stock with a par value of \)100,000 to himself at par for cash. At the next stockholders’ meeting, Baker objected and claimed that her interests had been injured.

Instructions

  1. Which stockholder’s right was ignored in the issue of shares to Derek Wallace?
  2. How may the damage to Baker’s interests be repaired most simply?
  3. If Derek Wallace offered Baker a personal cash settlement and they agreed to employ you as an impartial arbitrator to determine the amount, what settlement would you propose? Present your calculations with sufficient explanation to satisfy both parties.

Teller Corporation’s post-closing trial balance at December 31, 2017, was as follows.

TELLER CORPORATION

POST-CLOSING TRIAL BALANCE

DECEMBER 31, 2017

Dr.

Cr.

Accounts payable

\( 310,000

Accounts receivable

\) 480,000

Accumulated depreciation—building and equipment

185,000

Allowance for doubtful accounts

30,000

Bonds payable

700,000

Building and equipment

1,450,000

Cash

190,000

Dividends payable on preference shares—cash

4,000

Inventories

560,000

Land

400,000

Prepaid expenses

40,000

Retained earnings

201,000

Share capital—ordinary (\(1 par value)

200,000

Share capital—preference (\)50 par value)

500,000

Share premium—ordinary

1,000,000

Share premium—treasury

160,000

Treasury shares—ordinary at cost

170,000

Totals

\(3,290,000

\)3,290,000

On December 31, 2017, Teller had the following number of ordinary and preference shares.

Ordinary

Preference

Authorized

600,000

60,000

Issued

200,000

10,000

Outstanding

190,000

10,000

The dividends on preference shares are \(4 cumulative. In addition, the preference shares have a preference in the liquidation of \)50 per share.

Instructions

Prepare the equity section of Teller’s statement of financial position at December 31, 2017.

(Recording the Issuances of Common Stock) During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock.

Jan. 10 Issued 80,000 shares for cash at \(6 per share.

Mar. 1 Issued 5,000 shares to attorneys in payment of a bill for

\)35,000 for services rendered in helping the company to

incorporate.

July 1 Issued 30,000 shares for cash at \(8 per share.

Sept. 1 Issued 60,000 shares for cash at \)10 per share.

Instructions

  1. Prepare the journal entries for these transactions, assuming that the common stock has a par value of \(5 per share.
  2. Prepare the journal entries for these transactions, assuming that the common stock is no-par with a stated value of \)3 per share.

Twenty-five thousand shares reacquired by Elixir Corporation for \(53 per share were exchanged for undeveloped land that has an appraised value of \)1,700,000. At the time of the exchange, the common stock was trading at $62 per share on an organized exchange.

Instructions

a) Prepare the journal entry to record the acquisition of land assuming that the purchase of the stock was originally recorded using the cost method.

b) Briefly identify the possible alternatives (including those that are totally unacceptable) for quantifying the cost of the land and briefly support your choice.
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