Grey Limited has been authorized to issue 20,000 100 par value, 10%, noncumulative preference shares and 1,000,000
Question:
Grey Limited has been authorized to issue 20,000 £100 par value, 10%, non‐cumulative preference shares and 1,000,000 no‐par ordinary shares. The company assigned a £2.50 stated value to the ordinary shares. At December 31, 2020, the ledger contained the following balances pertaining to equity.
Share Capital—Preference | $120,000 |
Share Premium—Preference | 12,000 |
Share Capital—Ordinary | 1,000,000 |
Share Premium—Ordinary | 1,600,000 |
Treasury Shares—Ordinary (1,000 shares) | 9,000 |
Share Premium—Treasury | 1,000 |
Retained Earnings | 82,000 |
The preference shares were issued for land having a fair value of £132,000. All ordinary shares issued were for cash. In November, 1,500 ordinary shares were purchased for the treasury at a per share cost of £9. In December, 500 treasury shares were sold for £11 per share. No dividends were declared in 2020.
Required:
a. Reproduce the Retained Earnings account for 2020 and give your interpretation!
1. Issuance of preference shares for land.
2. Issuance of ordinary shares for cash.
3. Purchase of treasury shares (ordinary) for cash.
4. Sale of treasury shares for cash.
b. Prepare the equity section at December 31, 2020 and analyze the result!
Accounting Principles
ISBN: 978-1119419617
IFRS global edition
Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt