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intermediate accounting 11th

Intermediate Accounting IFRS International Adaptation 5th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

6. What are the arguments for giving separate accounting recognition to the conversion feature of a convertible bond?
5. Explain how the conversion feature of convertible debt has a value(a) to the issuer and (b) to the purchaser.
4. Bridgewater SA offered holders of its 1,000 convertible bonds a premium of €160 per bond to induce conversion into ordinary shares. Upon conversion of all the bonds, Bridgewater SA recorded the €160,000 premium as a reduction of Share Premium—Ordinary.Comment on Bridgewater’s treatment
3. Discuss the similarities between convertible debt and debt issued with share warrants.
2. Briefly explain why companies issue convertible securities.
1. What is meant by a dilutive security?
CA14.7 (LO 2) Ethics (Treasury Shares) Lois Kenseth, president of Sycamore Corporation, is concerned about several large shareholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation’s CEO. She
CA14.6 (LO 2, 3) (Share Dividend, Cash Dividend, and Treasury Shares) Mask SE has 30,000 shares of €10 par value ordinary shares authorized and 20,000 shares issued and outstanding. On August 15, 2025, Mask purchased 1,000 shares of treasury shares for €18 per share. Mask uses the cost method
CA14.5 (LO 3) (Share Dividends) Yamada Inc., a client, is considering the authorization of a 10%ordinary share dividend. The financial vice president of Yamada wishes to discuss the accounting implications of such an authorization with you before the next meeting of the board of
CA14.4 (LO 3) (Share Dividends and Splits) The directors of Merchant ASA are considering the issuance of a share dividend. They have asked you to discuss the proposed action by answering the following questions.Instructionsa. What is a share dividend? How is a share dividend distinguished from a
CA14.3 (LO 1, 2, 3) Writing (Conceptual Issues—Equity) The IASB has set forth the Conceptual Framework that it will use in developing standards. As part of this Conceptual Framework, the IASB defines various elements of financial statements.Instructions Answer the following questions based on the
CA14.2 (LO 1) (Issuance of Shares for Land) Martin Corporation is planning to issue 3,000 shares of its own $10 par value ordinary shares for two acres of land to be used as a building site.Instructionsa. What general rule should be applied to determine the amount at which the land should be
CA14.1 (LO 1) (Preemptive Rights and Dilution of Ownership) Wallace Computer is a small, closely held company. Derek Wallace, the president, holds 80% of the shares. Of the remainder, 10% are held by members of his family and 10% by Kathy Baker, a former officer who is now retired. The statement of
P14.12 (LO 1, 2, 3, 4) (Analysis and Classification of Equity Transactions) Penzi plc was formed on July 1, 2023. It was authorized to issue 300,000 shares of £10 par value ordinary shares and 100,000 shares of 8% £25 par value, cumulative and non-participating preference shares. Penzi plc has a
P14.11 (LO 3, 4) (Share and Cash Dividends) Earnhart Corporation has outstanding 3,000,000 ordinary shares with a par value of $10 each. The balance in its retained earnings account at January 1, 2025, was $24,000,000, and it then had Share Premium of $5,000,000. During 2025, the company’s net
P14.10 (LO 3) Writing (Share Dividends and Share Split) Ortago S.A.’s €10 par ordinary shares are selling for €110 per share. Four million shares are currently issued and outstanding. The board of directors wants to stimulate interest in Ortago S.A. ordinary shares before a forthcoming share
P14.9 (LO 1, 2, 3, 4) (Equity Section of Statement of Financial Position) The following is a summary of all relevant transactions of Vicario Corporation since it was organized in 2025.In 2025, 15,000 shares were authorized and 7,000 ordinary shares ($50 par value) were issued at a price of $57. In
P14.8 (LO 3) Groupwork (Dividends and Splits) Myers SpA provides you with the following condensed statement of financial position information.Assets Equity and Liabilities Equipment (net) €250,000 Equity Intangibles 60,000 Share capital—ordinary (€5 par) € 20,000 Investments in ABC shares
P14.7 (LO 2, 3) (Cash Dividend Entries) The books of Conchita SA carried the following account balances as of December 31, 2025.Cash R$ 195,000 Share Capital—Preference (6% cumulative, non-participating, R$50 par) 300,000 Share Capital—Ordinary (no-par value, 300,000 shares issued) 1,500,000
P14.6 (LO 2, 3, 4) Groupwork (Treasury Shares—Equity Section Preparation) Washington Company has the following equity accounts at December 31, 2025.Share Capital—Ordinary—$100 par value, authorized 8,000 shares $480,000 Retained Earnings 294,000 Instructionsa. Prepare entries in journal form
P14.5 (LO 2) (Treasury Shares) Before Smith Ltd. engages in the treasury share transactions listed below, its general ledger reflects, among others, the following account balances (par value is £30 per share).Share Premium—Ordinary Share Capital—Ordinary Retained Earnings£99,000 £270,000
P14.4 (LO 1) (Share Transactions—Lump Sum) Seles SA’s charter authorized issuance of 100,000 ordinary shares of €10 par value and 50,000 shares of €50 preference shares. The following transactions involving the issuance of shares were completed. Each transaction is independent of the
P14.3 (LO 1, 2, 3, 4) (Equity Transactions and Statement Preparation) Hatch plc has two classes of share capital outstanding: 8%, £20 par preference and £5 par ordinary. At December 31, 2024, the following accounts were included in equity.Share Capital—Preference, 150,000 shares £ 3,000,000
P14.2 (LO 2, 4) (Treasury Share Transactions and Presentation) Clemson SE had the following equity as of January 1, 2025.Share capital—ordinary, €5 par value, 20,000 shares issued €100,000 Share premium—ordinary 300,000 Retained earnings 320,000 Total equity €720,000 During 2025, the
P14.1 (LO 1, 2, 3, 4) Groupwork (Equity Transactions and Statement Preparation) On January 5, 2025, Phelps Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and non-participating preference shares, and 50,000 shares of $10 par value ordinary
*E14.24 (LO 5) (Computation of Book Value per Share) Johnstone Inc. began operations in January 2024 and reported the following results for each of its 3 years of operations.2024 $260,000 net loss 2025 $40,000 net loss 2026 $700,000 net income At December 31, 2026, Johnstone Inc. share capital
*E14.23 (LO 5) (Preference Share Dividends) Hagar Ltd. has outstanding 2,500 shares of £100 par, 6% preference shares and 15,000 shares of £10 par value ordinary. The schedule below shows the amount of dividends paid out over the last 4 years.Instructions Allocate the dividends to each type of
*E14.22 (LO 5) (Preference Dividends) Martinez SA’s ledger shows the following balances on December 31, 2025.Share Capital—Preference, 5%—€10 par value, outstanding 20,000 shares € 200,000 Share Capital—Ordinary—€100 par value, outstanding 30,000 shares 3,000,000 Retained Earnings
*E14.21 (LO 5) (Preference Dividends) The outstanding share capital of Pennington Corporation consists of 2,000 shares of $100 par value, 6% preference, and 5,000 shares of $50 par value ordinary.Instructions Assuming that the company has retained earnings of $70,000, all of which is to be paid out
E14.20 (LO 4) (Trading on the Equity Analysis) Presented below is information from the annual report of DeVries Plastics.Operating income € 532,150 Bond interest expense 135,000 Income before income tax 397,150 Income tax 183,432 Net income € 213,718 Bonds payable €1,500,000 Share
E14.19 (LO 4) (Comparison of Alternative Forms of Financing) Shown below is the equity and liabilities section of the statement of financial position for Ingalls plc and Wilder Ltd. Each has assets totaling £4,200,000.Ingalls plc Wilder Ltd.Share capital—ordinary (£20 par) £2,000,000 Share
E14.18 (LO 2, 3, 4) Groupwork (Dividends and Equity Section) Elizabeth Company reported the following amounts in the equity section of its December 31, 2025, statement of financial position.Share capital—preference, 8%, $100 par (10,000 shares authorized, 2,000 shares issued) $200,000 Share
E14.17 (LO 1, 4) (Equity Section) Teller SE’s post-closing trial balance at December 31, 2025, was as follows.Teller SE Post-Closing Trial Balance December 31, 2025 Dr. Cr.Accounts payable € 310,000 Accounts receivable € 480,000 Accumulated depreciation—buildings 185,000 Allowance for
E14.16 (LO 1, 2, 3) (Computation of Retained Earnings) The following information has been taken from the ledger accounts of Choi Corporation (all amounts in thousands).Total Income Since Incorporation W287,000 Total Cash Dividends Paid 60,000 Total Value of Share Dividends Distributed 40,000 Gains
E14.15 (LO 3) (Dividend Entries) The following data were taken from the statement of financial position accounts of Murless SA on December 31, 2025.Current Assets R$540,000 Investments 624,000 Share Capital—Ordinary (par value R$10) 600,000 Share Premium—Ordinary 150,000 Retained Earnings
E14.14 (LO 3) (Entries for Share Dividends and Share Splits) The equity accounts of Lawrence Group have the following balances on December 31, 2025.Share Capital—Ordinary, €10 par, 200,000 shares issued and outstanding €2,000,000 Share Premium—Ordinary 1,200,000 Retained Earnings 5,600,000
E14.13 (LO 3) (Share Split and Share Dividend) The ordinary shares of Otuk Holding are currently selling at 110 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is 10; book value is 70 per share. Five million shares are
E14.12 (LO 3) (Cash Dividend and Liquidating Dividend) Addison Corporation has 10 million shares of ordinary shares issued and outstanding. On June 1, the board of directors voted a 60 cents per share cash dividend to shareholders of record as of June 14, payable June 30.Instructionsa. Prepare the
E14.11 (LO 3) (Effect of Equity Items on the Statement of Financial Position) The following are selected transactions that may affect equity.1. Recorded accrued interest earned on a note receivable.2. Declared and distributed a share split.3. Declared a cash dividend.4. Recorded a retained earnings
E14.10 (LO 1, 2, 4) (Analysis of Equity Data and Equity Section Preparation) For a recent 2-year period, the statement of financial position of Jiang Group showed the following equity data at December 31 (amounts in millions).2026 2025 Share premium—ordinary HK$ 891 HK$ 817 Share
E14.9 (LO 1, 2) (Correcting Entries for Equity Transactions) Davison plc recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation
*E14.8 (LO 1, 5) (Preference Share Entries and Dividends) Weisberg Corporation has 10,000 shares of $100 par value, 6%, preference shares and 50,000 ordinary shares of $10 par value outstanding at December 31, 2025.Instructions Answer the questions in each of the following independent situations.a.
E14.7 (LO 2) (Effect of Treasury Share Transactions on Financials) Goosen SA has outstanding 40,000 shares of €5 par ordinary shares which had been issued at €30 per share. Goosen then entered into the following transactions.1. Purchased 5,000 treasury shares at €45 per share.2. Resold 500 of
E14.6 (LO 1, 2) (Share Issuances and Repurchase) Loxley Corporation is authorized to issue 50,000 shares of $10 par value ordinary shares. During 2025, Loxley took part in the following selected transactions.1. Issued 5,000 shares at $45 per share, less costs related to the issuance of the shares
E14.5 (LO 1) (Lump-Sum Sales of Ordinary and Preference Shares) Hartman SE issues 500 shares of €10 par value ordinary shares and 100 shares of €100 par value preference shares for a lump sum of €100,000.Instructionsa. Prepare the journal entry for the issuance when the fair value of the
E14.4 (LO 1) (Lump-Sum Sale of Shares with Bonds) Fogelberg Industries is a regional company, whose securities are thinly traded. Fogelberg has issued 10,000 units. Each unit consists of a CHF500 par, 12% subordinated debenture and 10 shares of CHF5 par ordinary shares. The investment banker has
E14.3 (LO 1) (Shares Issued for Land) Twenty-five thousand shares reacquired by Pierce plc for£48 per share were exchanged for undeveloped land that has an appraised value of £1,700,000. At the time of the exchange, the ordinary shares were trading at £60 per share on an organized
E14.2 (LO 1) (Recording the Issuance of Ordinary and Preference Shares) Abernathy Corporation was organized on January 1, 2025. It is authorized to issue 10,000 shares of 8%, $50 par value preference shares, and 500,000 shares of no-par ordinary shares with a stated value of $2 per share. The
E14.1 (LO 1) (Recording the Issuances of Ordinary Shares) During its first year of operations, Sitwell SE had the following transactions pertaining to its ordinary shares.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
*BE14.15 (LO 5) Nottebart AG has outstanding 10,000 shares of €100 par value, 6% preference shares and 60,000 shares of €10 par value ordinary shares. The preference shares were issued in January 2025, and no dividends were declared in 2025 or 2026. In 2027, Nottebart declares a cash dividend
BE14.14 (LO 3) Use the information from BE14.13 but assume Green Day Corporation declared a 100% share dividend rather than a 5% share dividend. Prepare the journal entries for both the date of declaration and the date of distribution.
BE14.13 (LO 3) Green Day Corporation has outstanding 400,000 shares of $10 par value ordinary shares. The corporation declares a 5% share dividend when the fair value is $65 per share. Prepare the journal entries for Green Day Corporation for both the date of declaration and the date of
BE14.12 (LO 3) Zhang Mining Company declared on April 20 a dividend of ¥500,000,000, payable on June 1. Of this amount, ¥125,000,000 is a return of capital. Prepare the April 20 and June 1 entries for Zhang.
BE14.11 (LO 3) Silva SpA owns shares of Costa S.A. classified as a trading equity investment. At December 31, 2025, the trading equity investment was carried in Silva’s accounting records at its cost of R$875,000, which equals its fair value. On September 21, 2026, when the fair value of the
BE14.10 (LO 3) Woolford Inc. declared a cash dividend of $1 per share on its 2 million outstanding shares. The dividend was declared on August 1, payable on September 9 to all shareholders of record on August 15. Prepare all journal entries necessary on those three dates.
BE14.9 (LO 1) Hinges SpA issued 500 shares of €100 par value preference shares for €61,500. Prepare Hinges’s journal entry.
BE14.8 (LO 2) Arantxa S.A. has outstanding 20,000 shares of R$5 par value ordinary shares. On August 1, 2025, Arantxa reacquired 200 shares at R$80 per share. On November 1, Arantxa reissued the 200 shares at R$70 per share. Arantxa had no previous treasury share transactions. Prepare Arantxa’s
BE14.7 (LO 2) Sprinkle SE has outstanding 10,000 shares of €10 par value ordinary shares. On July 1, 2025, Sprinkle reacquired 100 shares at €87 per share. On September 1, Sprinkle reissued 60 shares at €90 per share. On November 1, Sprinkle reissued 40 shares at €83 per share. Prepare
BE14.6 (LO 1) Moonwalker Corporation issued 2,000 shares of its $10 par value ordinary shares for$60,000. Moonwalker also incurred $1,500 of costs associated with issuing the shares. Prepare Moonwalker’s journal entry to record the issuance of the company’s shares.
BE14.5 (LO 1) On February 1, 2025, Gruber plc issued 3,000 shares of its £5 par value ordinary shares for land worth £31,000. Prepare the February 1, 2025, journal entry.
BE14.4 (LO 1) Ravonette Corporation issued 300 shares of $10 par value ordinary shares and 100 shares of $50 par value preference shares for a lump sum of $13,500. The ordinary shares have a market price of $20 per share, and the preference shares have a market price of $90 per share. Prepare the
BE14.3 (LO 1, 2, 4) Wilco SE has the following equity balances at December 31, 2025.Share capital—ordinary, €5 par value € 510,000 Treasury shares 90,000 Retained earnings 2,340,000 Share premium—ordinary 1,320,000 Prepare Wilco’s December 31, 2025, equity section in the statement of
BE14.2 (LO 1) Swarten AG issued 600 shares of no-par ordinary shares for €8,200. Prepare Swarten’s journal entry if (a) the shares have no stated value, and (b) the shares have a stated value of €2 per share.
BE14.1 (LO 1) Kaymer SA issued 300 shares of €10 par value ordinary shares for €4,500. Prepare Kaymer’s journal entry.
*29. Wang Corp. had $100,000 of 7%, $20 par value preference shares and 12,000 shares of $25 par value ordinary shares outstanding throughout 2025.a. Assuming that total dividends declared in 2025 were $64,000 and that the preference shares are not cumulative but are fully participating, ordinary
28. How are restrictions of retained earnings reported?
27. For what reasons might a company restrict a portion of its retained earnings?
26. This comment appeared in the annual report of Christensen Inc.:“The Company could pay cash or property dividends on the Class A ordinary shares without paying cash or property dividends on the Class B ordinary shares. But if the Company pays any cash or property dividends on the Class B
25. The following comment appeared in the notes of Mona Corporation’s annual report: “Such distributions, representing proceeds from the sale of Sarazan, Inc., were paid in the form of partial liquidating dividends and were in lieu of a portion of the Company’s ordinary cash dividends.” How
24. Share splits and share dividends may be used by a corporation to change the number of its shares outstanding.a. From an accounting viewpoint, explain how the share split differs from an ordinary share dividend.b. How should a share dividend that has been declared but not yet issued be
23. Describe the accounting entry for a share dividend, if any.Describe the accounting entry for a share split, if any.
22. Distinguish among cash dividends, property dividends, liquidating dividends, and share dividends.
21. Dividends are sometimes said to have been paid “out of retained earnings.” What is the error, if any, in that statement?
20. What are the principal considerations of a board of directors in making decisions involving dividend declarations? Discuss briefly.
19. What factors influence the dividend policy of a company?
18. Indicate how each of the following accounts should be classified in the equity section.a. Share Capital—Ordinaryb. Retained Earningsc. Share Premium—Ordinaryd. Treasury Sharese. Share Premium—Treasuryf. Accumulated Other Comprehensive Income g. Share Capital—Preference
17. BMG purchases 10,000 shares of its own previously issued €10 par ordinary shares for €290,000. Assuming the shares are held in the treasury with intent to reissue, what effect does this transaction have on (a) net income, (b) total assets, (c) retained earnings, and(d) total equity?
16. List five elements included in equity.
15. Where in the financial statements are preference shares normally reported?
14. Kim Inc. recently noted that its 4% preference shares and 4% participating preference shares are both cumulative and have priority as to dividends up to 4% of their par value. Its participating preference shares participate equally with the ordinary shares in any dividends in excess of 4%. What
13. What features or rights may alter the character of preference shares?
12. Discuss the propriety of showing:a. Treasury shares as an asset.b. “Gain” or “loss” on sale of treasury shares as additions to or deductions from income.c. Dividends received on treasury shares as income.
11. For what reasons might a company purchase its own shares?
10. Explain how underwriting costs and accounting and legal fees associated with the issuance of shares should be recorded.
9. What are the different bases for share valuation when assets other than cash are received for issued shares?
8. Explain the difference between the proportional method and the incremental method of allocating the proceeds of lump-sum sales of share capital.
7. Describe the accounting for the issuance for cash of no-par value ordinary shares at a price in excess of the stated value of the ordinary shares.
6. What is meant by par value, and what is its significance to shareholders?
5. Explain each of the following terms: authorized ordinary shares, unissued ordinary shares, issued ordinary shares, outstanding ordinary shares, and treasury shares.
4. Why is the distinction between contributed capital (paid-in capital) and retained earnings important?
3. Distinguish between ordinary and preference shares.
2. Why is a preemptive right important?
1. In the absence of restrictive provisions, what are the basic rights of shareholders of a corporation?
CA13.6 (LO 1, 4) Ethics (Bond Issue) Donald Lennon is the president, founder, and majority owner of Edina Medical Group, an emerging medical technology products company. Edina is in dire need of additional capital to keep operating and to bring several promising products to final development,
CA13.5 (LO 4) Writing (Off-Balance-Sheet Financing) Matt Ryan Corporation is interested in building its own soda can manufacturing plant adjacent to its existing plant in Partyville, Kansas.The objective is to ensure a steady supply of cans at a stable price and to minimize transportation
CA13.4 (LO 1, 3, 4) Writing (Bond Theory: Amortization and Gain or Loss Recognition)Part I: The required method of amortizing a premium or discount on issuance of bonds is the effectiveinterest method.Instructions How is amortization computed using the effective-interest method, and why and how do
CA13.3 (LO 1, 3, 4) (Bond Theory: Price, Presentation, and Retirement) On March 1, 2026, Sealy Sundries sold its 5-year, £1,000 face value, 9% bonds dated March 1, 2026, at an effective annual interest rate (yield) of 11%. Interest is payable semiannually, and the first interest payment date is
CA13.2 (LO 1, 4) Writing (Various Non-Current Liability Conceptual Issues) Schrempf AG has completed a number of transactions during 2025. In January, the company purchased under contract a machine at a total price of €1,200,000, payable over 5 years with installments of €240,000 per year. The
CA13.1 (LO 1, 4) (Bond Theory: Statement of Financial Position Presentations, Interest Rate, Premium) On January 1, 2026, Nichols Company issued for $1,085,800 its 20-year, 11% bonds that have a maturity value of $1,000,000 and pay interest semiannually on January 1 and July 1. Bond issue costs
P13.14 (LO 1, 3, 4) Groupwork (Comprehensive Problem: Issuance, Classification, Reporting)Presented below are three independent situations.Instructionsa. On January 1, 2025, Langley Co. issued 9% bonds with a face value of $700,000 for $656,992 to yield 10%. The bonds are dated January 1, 2025, and

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