The transactions listed below relate to Wainwright Inc. You are

The transactions listed below relate to Wainwright Inc. You are to assume that on the date on which each of the transactions occurred, the company's accounts showed only ordinary shares ($100 par) outstanding, a current ratio of 2.7:1, and a substantial net income for the year to date (before giving effect to the transaction concerned). On that date, the book value per share was $151.53.
Each numbered transaction is to be considered completely independent of the others, and its related answer should be based on the effect(s) of that transaction alone. Assume that all numbered transactions occurred during 2019 and that the amount involved in each case is sufficiently material to distort reported net income if improperly included in the determination of net income. Assume further that each transaction was recorded in accordance with IFRS and, where applicable, in conformity with the all-inclusive concept of the income statement.
For each of the numbered transactions you are to decide whether it:
a. Increased the company's 2019 net income
b. Decreased the company's 2019 net income.
c. Increased the company's total retained earnings directly (i.e., not via net income).
d. Decreased the company's total retained earnings directly.
e. Increased the company's current ratio.
f. Decreased the company's current ratio.
g. Increased each shareholder's proportionate share of total equity.
h. Decreased each shareholder's proportionate share of total equity.
i. Increased each shareholder's equity per share (book value).
j. Decreased each shareholder's equity per share (book value).
k. Had none of the foregoing effects.
Instructions
List the numbers 1 through 9. Select as many letters as you deem appropriate to reflect the effect(s) of each transaction as of the date of the transaction by printing beside the transaction number the letter(s) that identifies that transaction's effect(s).
Transactions
______ 1. In January, the board directed the write-off of certain patent rights that had suddenly and unexpectedly become worthless.
______ 2. The company sold at a profit land and a building that had been idle for some time. Under the terms of the sale, the company received a portion of the sales price in cash immediately, the balance maturing at 6-month intervals.
______ 3. Treasury shares originally repurchased and carried at $127 per share were sold for cash at $153 per share.
______ 4. The company wrote off all of the unamortized discount and issue expense applicable to bonds that it refinanced in 2019.
______ 5. The company called in all its outstanding ordinary shares and exchanged them for new shares on a 2-for-1 basis, reducing the par value at the same time to $50 per share.
______ 6. The company paid a cash dividend that had been recorded in the accounts at time of declaration.
______ 7. Litigation involving Wainwright Inc. as defendant was settled in the company's favor, with the plaintiff paying all court costs and legal fees. In 2016, the company had appropriately established a special contingency for this court action. (Indicate the effect of reversing the contingency only.)
______ 8. The corporation received a check for the proceeds of an insurance policy from the company with which it is insured against theft of trucks. No entries concerning the theft had been made previously, and the proceeds reduce but do not cover completely the loss.
______ 9. Treasury shares, which had been repurchased at and carried at $127 per share, were issued as a share dividend. In connection with this distribution, the board of directors of Wainwright Inc. had authorized a transfer from retained earnings to permanent share capital of an amount equal to the aggregate market price ($153 per share) of the shares issued. No entries relating to this dividend had been made previously.

Members

  • Access to 1 Million+ Textbook solutions
  • Ask any question from 24/7 available
    Tutors
$9.99
VIEW SOLUTION
OR

Non-Members

Get help from Managerial Accounting Tutors
Ask questions directly from Qualified Online Managerial Accounting Tutors .
Best for online homework instance.