Gao Limited, a publicly traded company, uses IFRS and had the following events and transactions occur in its fis cal year ending October 31, 2011. Although no dates are given, the events described are in chronological order.
1. Gao Limited repurchased common shares on the open market to allow stock options to its key employees to be exer cised without a dilution effect resulting to the remaining shareholders. The weighted average issue price of the outstanding shares on the date of reacquisition was $34.20, and 4,000 shares were repurchased at a price of $44.40. On the date of declaration, Gao had contributed surplus for preferred share repurchases of $84,600 and contributed sur plus for common share repurchases of $22,700.
2. Common shares were issued in partial settlement of a purchase of land. Gao paid $33,000 and 5,000 common shares for the land. On the date of the transaction, the common shares were trading at $41.50.
3. Gao has 8,000 preferred shares outstanding. These shares are limited in number and are not traded on the public stock exchange. Gao declared a property dividend to be paid to the preferred shareholders. Shareholders will receive for each preferred share held one share of Trivex Corp. Gao holds 8,000 shares of Trivex (2% of the outstanding shares), and had purchased them in 2009 for $68,400 (or $8.55 per share). The shares were held as an investment since 2009 and accounted for using the fair value through other comprehensive income (FV-OCI) model with recy cling (transference). At the beginning of the fiscal year, the accumulated other comprehensive income had a debit bal ance in the amount of $2,350 relating only to the Trivex shares. The fair value of Trivex shares was $7.80 per share on the date of declaration of the property dividend. On the date of the dividend distribution, the fair value of the Trivex shares was $7.95. There being no longer any investments accounted for at FV-OCI, the reclassification entry needed to be recorded, in accordance with Gao's practice.
4. Gao declared a 5% stock dividend to the common shareholders. There were 43,200 common shares outstanding on the date of declaration and the market price of the common shares on that date was $39.70. The stock dividend was later distributed.
5. A shareholder, in an effort to persuade Gao to expand into her city, donated to the company a plot of land with an appraised value of $42,000.
6. Gao sold by subscription to an investment institution 10,000 common shares for $38.50 per share. The terms require 10% of the balance to be paid in cash immediately. The remainder is expected to be paid in fiscal year 2012.
7. Gao has term preferred shares on its statement of financial position. These shares are classified as debt. Gao declared a cash dividend of $3,800 on these shares. The dividend will be paid in the first week of the fiscal year 2012.
Instructions
(a) Prepare the underlying journal entries that were made by Gao Limited during 2011 to record all information related to the changes in each equity account and associated accounts over the year.
(b) Prepare the captions that would appear on Gao's statement of cash flows for the year ended October 31, 2011, using the indirect format. Include all necessary additional disclosures required under IFRS.
(c) How would your answer to parts (a) and (b) above change if the investments in Trivex were accounted for using the fair value through net income model? (d) How would your answer to parts (a) and (b) above change if Gao were using ASPE?