会计 英文版 十四单元 答案.doc

Solutions Manualto accompanyPrinciples of Accounting 2nd editionbyJerry Weygandt, Keryn Chalmers, Lorena Mitrione Michelle Fyfe, Susana Yuen, Donald Kieso, Paul KimmelChapter 14Companies: share capitalJohn Wiley & Sons Australia, LtdCHAPTER 14Companies: Share CapitalASSIGNMENT CLASSIFICATION TABLELearning ObjectivesQuestionsBriefExercisesExercisesProblems 1.Identify the major characteristics of a company.1, 2, 3, 4, 912.Differentiate between share capital and retained earnings.5, 6, 8, 10,11, 14, 1523A, 4A3.Record the issue of ordinary shares.7, 11, 12, 133, 4, 5, 61, 2, 3, 4, 5, 61A, 2A, 3A, 4A, 6A, 7A4.Explain the accounting for share buy-backs.15, 1672, 4, 6, 86A5.Differentiate preference shares from ordinary shares.174, 83, 5, 81A, 4A, 6A, 7A6.Prepare a shareholders equity section.2092, 7, 8, 9,10, 111A, 2A, 3A,4A, 5A, 6A, 7A7.Compute book value per share.18, 191012, 13ASSIGNMENT CHARACTERISTICS TABLEProblemNumberDescriptionDifficultyLevelTimeAllotted (min.)1Journalise shares transactions, post, and prepare share capital section.Simple30-402Journalise share transactions, and prepare shareholders equity section.Moderate30-403Journalise and post transactions, and prepare theshareholders equity section.Moderate30-404Journalise and post ordinary and preference share transactions, and prepare shareholders equity section.Moderate30-405Prepare shareholders equity section.Simple20-306Prepare entries for share transactions and prepare shareholders equity section.Moderate20-307Journalise share transactions and prepare share capital section.Moderate40-50BLOOMS TAXONOMY TABLECorrelation Chart between Blooms Taxonomy, Learning Objectives and End-of-Chapter Exercises and ProblemsLearning ObjectiveKnowledgeComprehensionApplicationAnalysisSynthesisEvaluation1.Identify the major characteristics of a company.Q14-4BE14-1Q14-1Q14-2Q14-3Q14-92.Differentiate between share capital and retained earnings.Q14-5Q14-6Q14-8Q14-10Q14-11Q14-14Q14-15BE14-2P14-3P14-43.Record the issue of ordinary shares.Q14-11Q14-12Q14-13Q14-7BE14-3BE14-4BE14-5BE14-6E14-1E14-2E14-3E14-5E14-6P14-1P14-2P14-3P14-4P14-6E14-64.Explain the accounting for share buy-backs.Q14-14Q14-15Q14-16E14-8BE14-7P14-65.Differentiate preference shares from ordinary shares.Q14-17E14-8BE14-4BE14-8E14-3E14-5P14-1P14-4P14-6P14-7E14-66.Prepare a shareholders equity section.Q14-20E14-8E14-10E14-11BE14-9E14-2E14-7E14-9P14-1P14-2P14-3P14-4P14-5P14-6P14-77.Compute book value per share.Q14-18Q14-19BE14-10E14-12E14-13Broadening Your PerspectiveInterpreting FinancialStatements Group DecisionExploring the WebFinancial ReportingComparative AnalysisCommunicationEthics CaseANSWERS TO QUESTIONS1.(a)Separate legal entity. A company is separate and distinct from its owners and it acts in its own name rather than in the name of its shareholders. In contrast to a partnership, the acts of the owners (shareholders) do not bind the company unless the owners are duly appointed agents of the company.(b)Limited liability of shareholders. Because of its separate legal existence, creditors of a company ordinarily have recourse only to company assets to satisfy their claims. Thus, the liability of shareholders is normally limited to their investment in the company.(c)Transferable ownership rights. Ownership of a company is held in shares. The shares are transferable units. Shareholders may dispose of part or all of their interest by simply selling their shares. The transfer of ownership to another party is entirely at the discretion of the shareholder.2.(a)The separation of ownership and management is an advantage to a company because it can hire professional managers to run the company. It is also a disadvantage to a company because it prevents owners from having an active role in directly managing the company.(b)Two other disadvantages of a company form of ownership are government regulations and company taxation. A company is subject to numerous regulations. Companies must pay income taxes. These taxes are substantial. Publicly owned companies are also required to make adequate disclosures of their financial affairs.3.(a)(1)The articles of incorporation is a document that creates a company. (2)The company constitution is the internal rules and procedures for conducting the affairs of a company. They also indicate the powers of the shareholders, directors and senior executives.(3)Preliminary expenses are costs incurred in the formation of a company. These costs include legal fees and promotional expenditure involved in the organisation of the business. Preliminary costs are capitalised as it would be expected that these costs will provide future economic benefits to the company.4.In the absence of restrictive provisions, the basic ownership rights of ordinary shareholders are the rights to:(1)vote in the election of a board of directors and in company actions that require shareholders approval.(2)share in company profits through the receipt of dividends.(3)keep the same percentage ownership when new shares of ordinary shares are issued (the preemptive right).(4)share in assets upon liquidation.5.(a)The two principal components of shareholders equity for a company are share capital (the investment of cash and other assets in the company by shareholders in exchange for shares) and retained earnings. The principal source of retained earnings is profit.(b)Share capital is the term used to describe the total amount paid-up on shares. Share capital may result through the issue of ordinary shares and/or preference shares.6.Each of the three basic financial statements for a company differs from those for a proprietorship. The income statement for a company will have income tax expense. For a company, a retained earnings statement is prepared to show the changes in retained earnings during the period. In the statement of financial position, the owners equity section is called the shareholders equity section.Answers to Questions (continued) 7.Shareholders EquityShare Capital100 000 ordinary shares, fully paid500 00050 000 ordinary shares, paid to $4200 000Total Share Capital700 000Retained Earnings 44 000Total Shareholders Equity$744 0008.Par value is an arbitrary amount assigned to each share. The share issue price is the price required to be paid in order to purchase the shares. Countries like Australia and New Zealand have removed the use of par value because par value is an immaterial value in relation to the issue price with no relationship with the market value of the share issued.9.Among the factors which influence the market value of shares are the companys profits and anticipated future earnings, its expected dividend rate per share, its current financial position, the current state of the economy, and the current state of the share markets.10.When a company issue shares, cash is received by the company and the share capital account is credited with the amount of shares issued, therefore increasing share capital. This is very different to stock exchange transactions where one shareholder sells some or all of their shares to another shareholder or investor. These type of transactions, known as stock exchange transactions, are not recorded by the company and therefore share capital remains the same. In these transactions, the company simply records the change in ownership of those shares often via the share registry service.11.When the board of directors of Unforgettable Houseboats Ltd makes the call the shareholders are obliged to pay the amount called. When shares are allotted, a legally binding contract is created, therefore shareholders are required to pay the amount owing as and when required. The amount per share required to be paid is $2 per share.12.If a shareholder fails to pay a call on a share the company can do one of two things:(a) take legal action against the shareholder to ensure the money is paid; or,(b) forfeit the shares. If the shares are forfeited, the shareholder who owned the shares loses any amount paid to the company and is no longer a shareholder of the company.13.When shares are issued for services or non-cash assets, the cost should be measured at the fair value of the consideration given up (in this case, the shares). The fair value of the shares is objectively determinable than that of the land, since the shares are actively traded on the stock exchange. Therefore, the land should be recorded at $90000.14.A company may repurchase its own shares for one of the following reasons:1.The company has surplus cash, and it does not have or is not aware of a sufficient profitable investment opportunity.2.Management may want to avoid a takeover of the company by an outside party.3.The buy back of shares may support the shares market price by decreasing the number of shares available.4.Management may be making a financing decision, that is, it may wish to replace some of the companys share capital with borrowed funds.15.When a company buys back its shares, the cost of the share buy-back is debited against shareholders equity, normally to the share capital account. Cash is credited at the cost of the buy-back. Thus, this transaction: (a) has no effect on profit, (b) decreases total assets, (c)reduces share capital, and (d) decreases total shareholders equity.Answers to Questions (continued)16.Under the accounting standards, namely IAS 1101 and AASB 101 Presentation of Financial Statements, when a company buys back its shares it requires the following disclosures: number of shares bought back price paid per share bought back amount debited to the shareholders equity accounts.The disclosure would normally be made in the notes to the financial statements.17.(a)Ordinary shares and preference shares both represent ownership of the company. Ordinary shares signifies the basic residual ownership; preference shares is ownership with certain privileges or preferences. Preference shareholders typically have a preference as to dividends and as to assets in the event of liquidation. However, preference shareholders generally do not have voting rights.(b)Some preference shares possess the additional features of being cumulative. If preference shares are cumulative, the preference shareholders must be paid both current-year dividends and unpaid prior year dividends before ordinary shareholders receive any dividends.(c)Dividends in arrears are disclosed in the notes to the financial statements.18.The formula for computing book value per share when a company has only ordinary shares issued is:TotalShareholdersEquityNumber ofOrdinary SharesIssued=Book Valueper ShareBook value per share represents the equity an ordinary shareholder has in the net assets of the company from owning one share.19.Book value per share represents the equity an ordinary shareholder has in the net assets of the company from owning one share. Market value is generally only remotely related to book value. A shares market value will reflect many factors, including the companys profits and anticipated future earnings, its expected dividend rate per share, its current financial position, the current state of the economy, and the current state of the securities or share markets.20.The answers are summarised in the table below:AccountClassification(a)(b)(c)(d)(e)(f)Ordinary sharesShare CapitalRetained EarningsPreference SharesOrdinary Share CapitalOrdinary Share CapitalShare capital ordinary sharesShare capitalRetained earningsShare Capital Preference SharesShare capital Ordinary SharesShare capital Ordinary Shares partly paidSOLUTIONS TO BRIEF EXERCISESBRIEF EXERCISE 14-1The advantages and disadvantages of a company are as follows:AdvantagesDisadvantagesSeparate legal existenceLimited liability of shareholdersTransferable ownership rightsAbility to acquire capitalContinuous lifeNo mutual agency for shareholdersProfessional managersSeparation of ownership and managementGovernment regulationsCompany taxationBRIEF EXERCISE 14-230 JuneProfit and Loss Summary450000Retained Earnings450000BRIEF EXERCISE 14-310 MayCash (1000 $10)10 000Ordinary share capital (1000 $10)10 000BRIEF EXERCISE 14-4Cash(10 000 $6)60 000Ordinary Share Capital60 000Cash(3000 $12)36 000Preference Share Capital36 000BRIEF EXERCISE 14-520 JuneCash (Trust Account)12 000Application12 000 (Record of receipt of application monies)25 JuneApplication (3000 $4)12 000Allotment (3000 $2)6 000Ordinary Share Capital18 000 (To record issue of 3000 shares)25 JuneCash12 000Cash (Trust Account)12 000 (Transfer application money to bank account)BRIEF EXERCISE 14-6Land (5000 $8)40 000Ordinary share capital (5000 $8)40 000BRIEF EXERCISE 14-71 MayOrdinary Share Capital (500 $9)4500Cash 4500Record buy-back of sharesBRIEF EXERCISE 14-8Cash (5000 $60)300 000Preference Share Capital (5000 $60)300000BRIEF EXERCISE 14-9INGHAM LTDStatement of Financial Position (partial) as at 30 JuneShareholders equityShare capitalShares5000 Ordinary shares, fully paid$ 500003000 Preference shares, fully paid300000Total share capital350 000Retained earnings45000Total Shareholders equity$395 000BRIEF EXERCISE 14-10Book value per share = $20.25 or ($810000 40000).SOLUTIONS TO EXERCISESEXERCISE 14-1(a)10 JanCash (70000 $10)700 000Ordinary share capital (70000 $10)70000010 JuneCash (40000 $16)640 000Ordinary share capital (40000 $16)640000(b)Share Capital70000 Ordinary Shares, fully paid700 00040000 Ordinary Shares, fully paid640 0001340000EXERCISE 14-2(a)10 JulyCash (Trust Account) (100 000 $10)1 000 000Application1 000 00010 AugApplication (100 000 $10)1 000 000Allotment (100 000 $10)1 000 000Ordinary Share Capital2 000 00010 AugCash1 000 000Cash (Trust Account)1 000 00030 AugCash1 000 000Allotment1 000 00010 SepCall (100 000 $10)1 000 000Ordinary Share Capital1 000 00030 SepCash1 000 000Call1 000 000(b)XYZ LIMITEDStatement of Financial Position (partial) as at 30 JuneShareholders equityShare capital100 000 ordinary shares, fully paid$3 000 000Total share capital3 000 000 Retained earnings 70 000Total shareholders equity$3 070 000EXERCISE 14-3(a)1 JulyCash (Trust Account) (40 000 $4)160 000Application160 0001 AugApplication (40 000 $4)160 000Allotment (40 000 $4)160 000Ordinary Share Capital320 0001 AugCash160 000Cash (Trust Account)160 00015 AugCash160 000Allotment160 00030 AugCall (40 000 $4)160 000Ordinary Share Capital160 00015 SepCash160 000Call160 0001 JanCash1 000 000Preference Share Capital1 000 0001 MarchLand140 000Ordinary Share Capital140 0001 JuneOrdinary Share Capital (5000 x $10)50 000Cash50 000(b)A. LIMITEDStatement of Financial Position (partial) as at 30 JuneShareholders equityShare capital45 000 ordinary shares, fully paid$ 570 00040 000 preference shares, fully paid1 000 000Total share capital1 570 000Retained earnings 45 000Total shareholders equity$1 615 000EXERCISE 14-4(a)15 MayCall (10 000 $4)40 000Ordinary Share Capital40 00030 MayCash (8000 $4)32 000Call32 00030 MayOrdinary Share Capital (2000 ($8 + $8 +$4)40 000Call (2000 $4)8 000Forfeited Shares Account (2000 ($8 + $8)32 00010 JuneCash (2000 $16)32 000Forfeited Shares Account (2000 $4)8 000Ordinary Share Capital (2000 $20)40 000(b)Forfeited Shares AccountNo. 612DateExplanationRef.DebitCreditBalance30 May32 00032 00010 June8 00024 000EXERCISE 14-52 MarchEquipment60000Ordinary Share Capital (5000 $12)6000012 JuneCash750000Ordinary Share Capital (60000 $12.50)750 00011 JulyCash (1000 $55)55000Preference