Homework 18

2015/5/21 Assignment Print View

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Score: 19outof19points(100%)

1.award:1outof1.00point

Thefollowingisanexcerptfromadisclosurenotefromthe2013annualreportofKaufmanChemicals,Inc.:COMPREHENSIVEINCOME(LOSS)Thecomponentsofcomprehensiveincome,netoftax,areasfollows(inmillions):YearsEndedDecember31 2013 2012 2011Netincome $856 $766 $594Othercomprehensiveincome: Changeinnetunrealizedgainsonavailableforsaleinvestments,netoftaxof$22,($14),and$15in2013,2012,and2011,respectively

34 (21) 23

Other (2) (1) 1Totalcomprehensiveincome $888 $744 $618Kaufman reports accumulated other comprehensive income in its statement of financial position as acomponentofshareholders'equityasfollows: ($inmillions) 2013 2012Shareholdersequity: Ordinarysharecapital 355 355 Sharepremium 8,567 8,567 Retainedearnings 6,544 5,988 Accumulatedothercomprehensiveincome 107 75 Totalshareholdersequity $15,573 $14,985 Required:(4) From the information provided, determine how Kaufman calculated the $107 million accumulated

othercomprehensiveincomein2013.(Enteryouranswersinmillions.Amountstobedeductedshouldbeindicatedwithaminussign.Omitthe"$"signinyourresponse.) ($inmillions)Accumulatedothercomprehensiveincome,2012 $75 Changeinnetunrealizedgainsoninvestments 34 Changein"other" 2 Accumulatedothercomprehensiveincome,2013 $107

WorksheetLearningObjective:1802Describecomprehensiveincomeanditscomponents.

Thefollowingisanexcerptfromadisclosurenotefromthe2013annualreportofKaufmanChemicals,Inc.:COMPREHENSIVEINCOME(LOSS)Thecomponentsofcomprehensiveincome,netoftax,areasfollows(inmillions):YearsEndedDecember31 2013 2012 2011Netincome $856 $766 $594Othercomprehensiveincome: Changeinnetunrealizedgainsonavailableforsaleinvestments,netoftaxof$22,($14),and$15in2013,2012,and2011,respectively 34 (21) 23



Other (2) (1) 1Totalcomprehensiveincome $888 $744 $618Kaufman reports accumulated other comprehensive income in its statement of financial position as acomponentofshareholders'equityasfollows: ($inmillions) 2013 2012Shareholdersequity: Ordinarysharecapital 355 355 Sharepremium 8,567 8,567 Retainedearnings 6,544 5,988 Accumulatedothercomprehensiveincome 107 75 Totalshareholdersequity $15,573 $14,985 Required:(4) From the information provided, determine how Kaufman calculated the $107 million accumulated

othercomprehensiveincomein2013.(Enteryouranswersinmillions.Amountstobedeductedshouldbeindicatedwithaminussign.Omitthe"$"signinyourresponse.) ($inmillions)Accumulatedothercomprehensiveincome,2012 $ 75 Changeinnetunrealizedgainsoninvestments 34 Changein"other" 2 Accumulatedothercomprehensiveincome,2013 $ 107




Indicatebyletterwhethereachoftheitemslistedbelowmostlikelyisreportedintheincomestatementas Net Income (NI) or in the statement of comprehensive income as Other Comprehensive Income(OCI). Items

1.Increaseinthefairvalueofavailableforsalesecurities OCI2.Gainonsaleofland NI3.Lossonpensionplanassets(actualreturnlessthanexpected) OCI4.Gainfromforeigncurrencytranslation OCI5.Increaseinthefairvalueoftradingsecurities NI6.Lossfromrevisinganassumptionrelatedtoapensionplan OCI7.Lossonsaleofpatent NI8.Priorservicecost OCI9.Increaseinthefairvalueofbondsoutstandingfairvalueoption NI

10.Gainonpostemploymentplanassets(actualreturnmorethanexpected) OCI

WorksheetLearningObjective:1802Describecomprehensiveincomeanditscomponents.

Indicatebyletterwhethereachoftheitemslistedbelowmostlikelyisreportedintheincomestatementas Net Income (NI) or in the statement of comprehensive income as Other Comprehensive Income(OCI). Items

1.Increaseinthefairvalueofavailableforsalesecurities OCI2.Gainonsaleofland NI3.Lossonpensionplanassets(actualreturnlessthanexpected) OCI4.Gainfromforeigncurrencytranslation OCI5.Increaseinthefairvalueoftradingsecurities NI6.Lossfromrevisinganassumptionrelatedtoapensionplan OCI7.Lossonsaleofpatent NI8.Priorservicecost OCI9.Increaseinthefairvalueofbondsoutstandingfairvalueoption NI

10.Gainonpostemploymentplanassets(actualreturnmorethanexpected) OCI





ThefollowingisanewsitemreportedbyReuters:

WASHINGTON,Jan29(Reuters)WrightMedicalGroup,amakerofreconstructiveimplantsforkneesandhips,onTuesdayfiledtosell3millionsharesofcommonstock. InafilingwiththeU.S.SecuritiesandExchangeCommission, itsaid itplanstousetheproceedsfrom the offering for general corporate purposes, working capital, research and development, andacquisitions.Afterthesaletherewillbeabout31.5millionsharesoutstandingintheArlington,Tennesseebasedcompany,accordingtotheSECfiling.Wrightsharesclosedat$17.15onNasdaq.ThecommonstockorordinaryshareofWrightMedicalGrouphasaparof$.01pershare.Required:Prepare the journal entry to record the sale of the shares assuming the price existing when theannouncement was made and ignoring share issue costs. (Enter your answers in dollars not inmillions.Omitthe"$"signinyourresponse.)

GeneralJournal Debit CreditCash 51,450,000

Commonstock 30,000 Paidincapitalexcessofpar 51,420,000

WorksheetLearningObjective:1804Recordtheissuanceofshareswhensoldforcashandfornoncashconsideration.

ThefollowingisanewsitemreportedbyReuters:

WASHINGTON,Jan29(Reuters)WrightMedicalGroup,amakerofreconstructiveimplantsforkneesandhips,onTuesdayfiledtosell3millionsharesofcommonstock. InafilingwiththeU.S.SecuritiesandExchangeCommission, itsaid itplanstousetheproceedsfrom the offering for general corporate purposes, working capital, research and development, andacquisitions.Afterthesaletherewillbeabout31.5millionsharesoutstandingintheArlington,Tennesseebasedcompany,accordingtotheSECfiling.Wrightsharesclosedat$17.15onNasdaq.ThecommonstockorordinaryshareofWrightMedicalGrouphasaparof$.01pershare.Required:Prepare the journal entry to record the sale of the shares assuming the price existing when theannouncement was made and ignoring share issue costs. (Enter your answers in dollars not inmillions.Omitthe"$"signinyourresponse.)

GeneralJournal Debit Credit

Cash 51,450,000

Commonstock 30,000 Paidincapitalexcessofpar 51,420,000

Explanation:

Cash=(3millionshares$17.15pershare)=51,450,000.Commonstock=(3millionshares$.01parpershare)=30,000.

Duringitsfirstyearofoperations,EasternDataLinksCorporationenteredintothefollowingtransactionsrelating toshareholdersequity.Thearticlesof incorporationauthorized the issueof8millionordinaryshares,$1parpershare,and1millionpreferenceshares,$50parpershare.



Feb.12Sold2millionordinaryshares,for$9pershare.13Issued40,000ordinarysharestoattorneysinexchangeforlegalservices.13Sold80,000ofitsordinarysharesand4,000preferencesharesforatotalof$945,000.

Nov.15Issued380,000of itsordinaryshares inexchangeforequipment forwhichthecashpricewasknowntobe$3,688,000.

Required:Preparetheappropriatejournalentriestorecordeachtransaction.(Enteryouranswersindollarsnotinmillions.Omitthe"$"signinyourresponse.)

Date GeneralJournal Debit CreditFeb.12 Cash 18,000,000

Commonstock 2,000,000 Paidincapitalexcessofpar,common 16,000,000 Feb.13 Legalexpenses 360,000 Commonstock 40,000 Paidincapitalexcessofpar,common 320,000 Feb.13 Cash 945,000 Commonstock 80,000 Paidincapitalexcessofpar,common 640,000 Preferredstock 200,000 Paidincapitalexcessofpar,preferred 25,000 Nov.15 Property,plantandequipment 3,688,000 Commonstock 380,000 Paidincapitalexcessofpar,common 3,308,000


Duringitsfirstyearofoperations,EasternDataLinksCorporationenteredintothefollowingtransactionsrelating toshareholdersequity.Thearticlesof incorporationauthorized the issueof8millionordinaryshares,$1parpershare,and1millionpreferenceshares,$50parpershare.Feb.12Sold2millionordinaryshares,for$9pershare.

13Issued40,000ordinarysharestoattorneysinexchangeforlegalservices.13Sold80,000ofitsordinarysharesand4,000preferencesharesforatotalof$945,000.

Nov.15Issued380,000of itsordinaryshares inexchangeforequipment forwhichthecashpricewasknowntobe$3,688,000.

Required:Preparetheappropriatejournalentriestorecordeachtransaction.(Enteryouranswersindollarsnotinmillions.Omitthe"$"signinyourresponse.)

Date GeneralJournal Debit Credit

Feb.12 Cash 18,000,000

Commonstock 2,000,000 Paidincapitalexcessofpar,common 16,000,000 Feb.13 Legalexpenses 360,000 Commonstock 40,000 Paidincapitalexcessofpar,common 320,000 Feb.13 Cash 945,000 Commonstock 80,000 Paidincapitalexcessofpar,common 640,000 Preferredstock 200,000 Paidincapitalexcessofpar,preferred 25,000 Nov.15 Property,plantandequipment 3,688,000




Commonstock 380,000 Paidincapitalexcessofpar,common 3,308,000

Explanation:

February12:Cash=(2millionshares$9pershare)=18,000,000.Ordinarystock=(2millionshares$1par)=2,000,000.February13:Legalexpenses=(40,000shares$9pershare)=360,000.Ordinarystock=(40,000shares$1par)=40,000.February13:Ordinarystock=(80,000shares$1par)=80,000.Paidincapitalexcessofpar,ordinary*=640,000.Preferencestock=(4,000shares$50par)=200,000.Paidincapitalexcessofpar,Preference**=25,000.*80,000sharesx[$9marketvalue$1par]** Since the value of the ordinary shares is known ($720,000), the market value of the preference($225,000)isassumedfromthetotalsellingprice($945,000).November15:Ordinarystock=(380,000sharesat$1parpershare)=380,000.

ICOT Industries issued 15 million of its $1 par ordinary shares for $424 million on April 11. Legal,promotional,andaccountingservicesnecessarytoeffectthesalecost$2million.Required:(1) Prepare the journal entry to record the issuanceof the shares. (Enter your answers inmillions.

Omitthe"$"signinyourresponse.)GeneralJournal Debit Credit

Cash 422 Commonstock 15 Paidincapitalexcessofpar 407

(2) ExplainhowrecordingtheshareissuecostsdiffersfromthewaydebtissuecostsarerecordedunderIFRSversusU.S.GAAP.


ICOT Industries issued 15 million of its $1 par ordinary shares for $424 million on April 11. Legal,promotional,andaccountingservicesnecessarytoeffectthesalecost$2million.

Inrecordingthesaleofsharesabove,thecostofservicesrelatedtothesalereducedthenetproceedsfromsellingtheshares.Sincepaidincapitalexcessofpariscreditedfortheexcessoftheproceedsovertheparamountofthesharessold,theeffectofshareissuecostsistoreducetheamountcreditedtothataccount.Ontheotherhand,thecostsassociatedwithadebtissuearerecordedinaseparatedebtissuecostsaccountandamortizedtoexpenseoverthelifeofthedebt.Somearguethatshareissuecostsanddebtissuecostsarefundamentallydifferent.Thisviewisthatadebtissuehasafixedmaturityso,likeinterestexpense,debtissuecostsarepartoftheexpenseofborrowingfundsforthatperiodoftime(recordedinaseparateexpenseaccountdebtissueexpense).Ontheotherhand,sellingsharesrepresentsaperpetualequityinterest.Justasdividendspaidonthatcapitalinvestmentarenotanexpense,neitheraretheshareissuecostsofobtainingthatcapitalinvestment.ExpensingdebtissuecostspresentlyisrequiredbyGAAP.However,theFASBhassuggestedinConceptStatement6thatthosecostsshouldbetreatedthesamewayasshareissuecosts,meaningthatthedebtissuecostswouldreducetherecordedamountofthedebtinstead




Required:(1) Prepare the journal entry to record the issuanceof the shares. (Enter your answers inmillions.

Omitthe"$"signinyourresponse.)GeneralJournal Debit Credit

Cash 422 Commonstock 15 Paidincapitalexcessofpar 407

(2) ExplainhowrecordingtheshareissuecostsdiffersfromthewaydebtissuecostsarerecordedunderIFRSversusU.S.GAAP.

Explanation:

Cash=($424million$2million)=422.Ordinarysharecapital=(15millionsharesat$1parpershare)=15.

BornerCommunicationsarticlesofincorporationauthorizedtheissuanceof130millionordinaryshares.The transactions described below effected changes in Borners outstanding shares. Prior to thetransactions,Bornersshareholdersequityincludedthefollowing:

ShareholdersEquity ($inmillions)Ordinarysharecapital,100millionsharesat$1par $100Additionalissuedcapital 300Retainedearnings 210Required:Assuming that Borner Communications retires shares it reacquires (restores their status to that ofauthorized but unissued shares), record the appropriate journal entry for each of the followingtransactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):1.OnJanuary7,2013,Bornerreacquired2millionsharesat$5.00pershare.2.OnAugust23,2013,Bornerreacquired4millionsharesat$3.50pershare.3.OnJuly25,2014,Bornersold3millionordinarysharesat$6pershare.

Date GeneralJournal Debit CreditJan.7,2013 Ordinarysharecapital 2

Additionalissuedcapital 6 Retainedearnings 2 Cash 10

Aug.23,2013Ordinarysharecapital 4 Additionalissuedcapital 12 Additionalissuedcapitalsharerepurchase 2 Cash 14

July25,2014 Cash 18 Ordinarysharecapital 3 Additionalissuedcapital 15

Inrecordingthesaleofsharesabove,thecostofservicesrelatedtothesalereducedthenetproceedsfromsellingtheshares.Sincesharepremiumiscreditedfortheexcessoftheproceedsovertheparamountofthesharessold,theeffectofshareissuecostsistoreducetheamountcreditedtothataccount.TheaccountingtreatmentforshareissuecostsissimilarunderbothIFRSandU.S.GAAP.Ontheotherhand,underU.S.GAAP,thecostsassociatedwithadebtissuearerecordedinaseparatedebtissuecostsaccountandamortizedtoexpenseoverthelifeofthedebt.WhereasunderIFRS,costsassociatedwithadebtissuearerecordedasareductionofthenetcashtheissuingcompanyreceivesfromthedebtissueandareductionofthecarryingamountofthedebt.Somearguethatshareissuecostsanddebtissuecostsarefundamentallydifferent.This




WorksheetLearningObjective:1805Distinguishbetweenaccountingforretiredsharesandfortreasuryshares.

BornerCommunicationsarticlesofincorporationauthorizedtheissuanceof130millionordinaryshares.The transactions described below effected changes in Borners outstanding shares. Prior to thetransactions,Bornersshareholdersequityincludedthefollowing:

ShareholdersEquity ($inmillions)Ordinarysharecapital,100millionsharesat$1par $100Additionalissuedcapital 300Retainedearnings 210Required:Assuming that Borner Communications retires shares it reacquires (restores their status to that ofauthorized but unissued shares), record the appropriate journal entry for each of the followingtransactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):1.OnJanuary7,2013,Bornerreacquired2millionsharesat$5.00pershare.2.OnAugust23,2013,Bornerreacquired4millionsharesat$3.50pershare.3.OnJuly25,2014,Bornersold3millionordinarysharesat$6pershare.

Date GeneralJournal Debit CreditJan.7,2013 Ordinarysharecapital 2

Additionalissuedcapital 6 Retainedearnings 2 Cash 10

Aug.23,2013Ordinarysharecapital 4 Additionalissuedcapital 12 Additionalissuedcapitalsharerepurchase 2 Cash 14

July25,2014 Cash 18 Ordinarysharecapital 3 Additionalissuedcapital 15

Explanation:

1.January7,2013:Ordinarysharecapital=(2millionshares$1par)=2.Additionalissuedcapital=(2millionshares$3*)=6.Cash=(2millionshares$5pershare)=10.*Additionalissuedcapital:$300100millionshares.2.August23,2013:Ordinarysharecapital=(4millionshares$1par)=4.Additionalissuedcapital=(4millionshares$3)=12.Cash=(4millionshares$3.50pershare)=14.3.July25,2014:Cash=(3millionshares$6pershare)=18.Ordinarysharecapital=(3millionshares$1par)=3.

In2013,BorlandSemiconductorsentered into the transactionsdescribedbelow. In2010,Borlandhadissued170millionsharesofits$1parordinarysharesat$34pershare.Required:AssumingthatBorlandretiresshares it reacquires, record theappropriate journalentry foreachof thefollowingtransactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):1.OnJanuary2,2013,Borlandreacquired10millionsharesat$32.50pershare.2.OnMarch3,2013,Borlandreacquired10millionsharesat$36pershare.3.OnAugust13,2013,Borlandsold1millionsharesat$42pershare.



4.OnDecember15,2013,Borlandsold2millionsharesat$36pershare.Date GeneralJournal Debit Credit

Jan.2,2013 Commonstock 10 Paidincapitalexcessofpar 330 Paidincapitalsharerepurchase 15 Cash 325 Mar.3,2013 Commonstock 10 Paidincapitalexcessofpar 330 Paidincapitalsharerepurchase 15 Retainedearnings 5 Cash 360 Aug.13,2013 Cash 42 Commonstock 1 Paidincapitalexcessofpar 41 Dec.15,2013 Cash 72 Commonstock 2 Paidincapitalexcessofpar 70


In2013,BorlandSemiconductorsentered into the transactionsdescribedbelow. In2010,Borlandhadissued170millionsharesofits$1parordinarysharesat$34pershare.Required:AssumingthatBorlandretiresshares it reacquires, record theappropriate journalentry foreachof thefollowingtransactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):1.OnJanuary2,2013,Borlandreacquired10millionsharesat$32.50pershare.2.OnMarch3,2013,Borlandreacquired10millionsharesat$36pershare.3.OnAugust13,2013,Borlandsold1millionsharesat$42pershare.4.OnDecember15,2013,Borlandsold2millionsharesat$36pershare.

Date GeneralJournal Debit CreditJan.2,2013 Commonstock 10 Paidincapitalexcessofpar 330 Paidincapitalsharerepurchase 15 Cash 325 Mar.3,2013 Commonstock 10 Paidincapitalexcessofpar 330 Paidincapitalsharerepurchase 15 Retainedearnings 5 Cash 360 Aug.13,2013 Cash 42 Commonstock 1 Paidincapitalexcessofpar 41 Dec.15,2013 Cash 72 Commonstock 2 Paidincapitalexcessofpar 70

Explanation:

1.January2,2013:




Ordinaryshares=(10millionshares$1par)=10.Paidincapitalexcessofpar=(10millionshares$33*)=330.*$34$1par.Cash=(10millionshares$32.50)=325.2.March3,2013:Ordinaryshares=(10millionshares$1)=10.Paidincapitalexcessofpar=(10millionshares$33*)=330.Cash=(10millionshares$36)=360.*$34$1par3.August13,2013:Cash=(1millionshares$42)=42.Ordinaryshares=(1millionshares$1)=1.4.December15,2013:Cash=(2millionshares$36)=72.Ordinaryshares=(2millionshares$1)=2.

In2013,WesternTransportCompanyentered into the treasurystock transactionsdescribedbelow. In2011,WesternTransporthadissued140millionsharesofits$1parordinarysharesat$17pershare.Required:Prepare the appropriate journal entry for each of the following transactions (Enter your answers inmillions.Roundyouranswerstothenearestdollaramounts.Omitthe"$"signinyourresponse):1.OnJanuary23,2013,WesternTransportreacquired10millionsharesat$20pershare.2.OnSeptember3,2013,WesternTransportsold1milliontreasurysharesat$21pershare.3.OnNovember4,2013,WesternTransportsold1milliontreasurysharesat$18pershare.

GeneralJournal Debit Credit1. Treasurystock 200 Cash 200 2. Cash 21 Treasurystock 20 Paidincapitalsharerepurchase 1 3. Cash 18

Paidincapitalsharerepurchase 1 Retainedearnings 1 Treasurystock 20


In2013,WesternTransportCompanyentered into the treasurystock transactionsdescribedbelow. In2011,WesternTransporthadissued140millionsharesofits$1parordinarysharesat$17pershare.Required:Prepare the appropriate journal entry for each of the following transactions (Enter your answers inmillions.Roundyouranswerstothenearestdollaramounts.Omitthe"$"signinyourresponse):1.OnJanuary23,2013,WesternTransportreacquired10millionsharesat$20pershare.2.OnSeptember3,2013,WesternTransportsold1milliontreasurysharesat$21pershare.3.OnNovember4,2013,WesternTransportsold1milliontreasurysharesat$18pershare.

GeneralJournal Debit Credit1. Treasurystock 200 Cash 200 2. Cash 21 Treasurystock 20




Paidincapitalsharerepurchase 1 3. Cash 18

Paidincapitalsharerepurchase 1 Retainedearnings 1 Treasurystock 20

Explanation:

1.Treasurystock=(10millionshares$20)=200.2.Cash=(1millionshares$21)=21.Treasurystock=(1millionshares$20)=20.3.Cash=(1millionshares$18)=18.Treasurystock=(1millionshares$20)=20.

AtDecember31,2012, thestatementof financialpositionofMeca International included the followingshareholdersequityaccounts:

ShareholdersEquity ($inmillions) Ordinarysharecapital,60millionsharesat$1par $ 60Additionalissuedcapital 300Retainedearnings 410

Required:Assuming thatMeca Internationalviews itssharebuybacksas treasuryshares, record theappropriatejournalentryforeachofthefollowingtransactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):1.OnFebruary12,2013,Mecareacquired1millionordinarysharesat$13pershare.2.OnJune9,2014,Mecareacquired2millionordinarysharesat$10pershare.3.On May 25, 2015, Meca sold 2 million treasury shares at $15 per sharedetermine cost as the

weightedaveragecostoftreasuryshares.4.Fortheprevioustransaction,assumeMecadeterminesthecostoftreasurysharesbytheFIFO

method.Date GeneralJournal Debit Credit

Feb.12,2013 Treasuryshares 13 Cash 13 Jun.9,2014 Treasuryshares 20 Cash 20 May25,2015 Cash 30 Additionalissuedcapitalsharerepurchase 8 Treasurystock 22 May25,2015 Cash 30 Additionalissuedcapitalsharerepurchase 7 Treasurystock 23




AtDecember31,2012, thestatementof financialpositionofMeca International included the followingshareholdersequityaccounts:

ShareholdersEquity ($inmillions) Ordinarysharecapital,60millionsharesat$1par $ 60Additionalissuedcapital 300Retainedearnings 410

Required:Assuming thatMeca Internationalviews itssharebuybacksas treasuryshares, record theappropriatejournalentryforeachofthefollowingtransactions(Enteryouranswersinmillions.Omitthe"$"signinyourresponse):1.OnFebruary12,2013,Mecareacquired1millionordinarysharesat$13pershare.2.OnJune9,2014,Mecareacquired2millionordinarysharesat$10pershare.3.On May 25, 2015, Meca sold 2 million treasury shares at $15 per sharedetermine cost as the

weightedaveragecostoftreasuryshares.4.Fortheprevioustransaction,assumeMecadeterminesthecostoftreasurysharesbytheFIFO

method.Date GeneralJournal Debit Credit

Feb.12,2013 Treasuryshares 13 Cash 13 Jun.9,2014 Treasuryshares 20 Cash 20 May25,2015 Cash 30 Additionalissuedcapitalsharerepurchase 8 Treasurystock 22 May25,2015 Cash 30 Additionalissuedcapitalsharerepurchase 7 Treasurystock 23

Explanation:

1.February12,2013:Treasuryshares=1millionshares$13=13

2.June9,2014:Treasuryshares=2millionshares$10=20

3.May25,2015:Cash=2millionshares$15=30Treasuryshares=2millionshares$11*=22 *1 millionshares$13= $13million

2 millionshares$10= 20million 3 millionshares $33million $33million3millionshares=$11averagecostpershare

4.May25,2015:Cash(2millionsharesx$15)=30 *1 millionshares$13= $13million

1 millionshares$10= 10million $23million



10.award:10outof10.00points

Theshareholders'equitysectionofthestatementoffinancialpositionofTNLSystemsLtdincludedthefollowingaccountsatDecember31,2012:

Shareholders'Equity ($inmillions)Ordinarysharecapital,240millionsharesat$1par $240Additionalissuedcapitalexcessofpar 1,680Additionalissuedcapitalsharerepurchase 1Retainedearnings 1,100Required:(1)During2013,TNLSystems reacquiredsharesof itsOrdinarysharecapitaland latersoldshares in

twoseparate transactions.Prepare theentries forboth thepurchaseandsubsequent resaleof thesharesassumingthesharesare(a)retiredand(b)viewedastreasurystock.(Enteryouranswersinmillionsofdollars.Omitthe"$"signinyourresponse.)

a. OnFebruary5,2013,TNLSystemspurchased6millionsharesat$10pershare. GeneralJournal Debit Credit

Feb.5,2013 Retirement Commonstock 6 Paidincapitalexcessofpar 42 Paidincapitalsharerepurchase 1 Retainedearnings 11 Cash 60 TreasuryStock Treasurystock 60 Cash 60

b. OnJuly9,2013,thecorporationsold2millionsharesat$12pershare. GeneralJournal Debit Credit

July9,2013 Retirement Cash 24 Commonstock 2 Paidincapitalexcessofpar 22 TreasuryStock Cash 24 Treasurystock 20 Paidincapitalsharerepurchase 4

c. OnNovember14,2015,thecorporationsold2millionsharesat$7pershare.

GeneralJournal Debit CreditNov.14,2015 Retirement Cash 14 Commonstock 2 Paidincapitalexcessofpar 12 TreasuryStock Cash 14 Paidincapitalsharerepurchase 5 Retainedearnings 1 Treasurystock 20

(2) PreparetheshareholdersequitysectionofTNLSystemsstatementoffinancialpositionatDecember31, 2015, comparing the two approaches. Assume all net income earned in 20132015 wasdistributedtoshareholdersascashdividends.(Enteryouranswerinmillionsofdollars.Leavenocells blank be certain to enter "0"wherever required.Amounts to be deducted should beindicatedwithaminussign.Omitthe"$"signsinyourresponses.)

Shareholder'sEquity $inmillions

Retirement TreasuryStock

Additionalissuedcapital: Ordinarysharecapital $238 $240 Additionalissuedcapitalexcessofpar 1,672 1,680 Additionalissuedcapitalsharerepurchase 0 0



Retainedearnings 1,089 1,099 Less:Treasurystock 20 Totalshareholdersequity $2,999 $2,999


Theshareholders'equitysectionofthestatementoffinancialpositionofTNLSystemsLtdincludedthefollowingaccountsatDecember31,2012:

Shareholders'Equity ($inmillions)Ordinarysharecapital,240millionsharesat$1par $240Additionalissuedcapitalexcessofpar 1,680Additionalissuedcapitalsharerepurchase 1Retainedearnings 1,100Required:(1)During2013,TNLSystems reacquiredsharesof itsOrdinarysharecapitaland latersoldshares in

twoseparate transactions.Prepare theentries forboth thepurchaseandsubsequent resaleof thesharesassumingthesharesare(a)retiredand(b)viewedastreasurystock.(Enteryouranswersinmillionsofdollars.Omitthe"$"signinyourresponse.)

a. OnFebruary5,2013,TNLSystemspurchased6millionsharesat$10pershare. GeneralJournal Debit Credit

Feb.5,2013 Retirement Commonstock 6 Paidincapitalexcessofpar 42 Paidincapitalsharerepurchase 1 Retainedearnings 11 Cash 60 TreasuryStock Treasurystock 60 Cash 60

b. OnJuly9,2013,thecorporationsold2millionsharesat$12pershare. GeneralJournal Debit Credit

July9,2013 Retirement Cash 24 Commonstock 2 Paidincapitalexcessofpar 22 TreasuryStock Cash 24 Treasurystock 20 Paidincapitalsharerepurchase 4

c. OnNovember14,2015,thecorporationsold2millionsharesat$7pershare.

GeneralJournal Debit CreditNov.14,2015 Retirement Cash 14 Commonstock 2 Paidincapitalexcessofpar 12 TreasuryStock Cash 14 Paidincapitalsharerepurchase 5 Retainedearnings 1



Treasurystock 20

(2) PreparetheshareholdersequitysectionofTNLSystemsstatementoffinancialpositionatDecember31, 2015, comparing the two approaches. Assume all net income earned in 20132015 wasdistributedtoshareholdersascashdividends.(Enteryouranswerinmillionsofdollars.Leavenocells blank be certain to enter "0"wherever required.Amounts to be deducted should beindicatedwithaminussign.Omitthe"$"signsinyourresponses.)

Shareholder'sEquity $inmillions

Retirement TreasuryStock

Additionalissuedcapital: Ordinarysharecapital $ 238 $ 240 Additionalissuedcapitalexcessofpar 1,672 1,680 Additionalissuedcapitalsharerepurchase 0 0 Retainedearnings 1,089 1,099 Less:Treasurystock 20 Totalshareholdersequity $ 2,999 $ 2,999

Explanation:

(1)Retirementa.February5,2013Ordinarysharecapital(6millionsh.$1)=6Additionalissuedcapitalexcessofpar(6millionshares$7*)=42Additionalissuedcapitalexcessofpar:$1,680240TreasuryStockTreasurystock(6millionsh.$10)=60b.July9,2013RetirementCash(2millionsh.$12)=24Ordinarysharecapital(2millionsh.$1)=2TreasuryStockCash(2millionsh.$12)=24Treasurystock(2millionsh.$10)=20c.November14,2015RetirementCash(2millionsh.$7)=14Ordinarysharecapital(2millionsh.$1)=2TreasuryStockCash(2millionsh.$7)=14Additionalissuedcapital.sh.repurchase($1+4)=5Treasurystock(2millionsh.$10)=20(2)Additionalissuedcapitalexcessofpar=1,672*1,68042+22+12Retainedearnings=1,089****1,10011Retainedearnings=1,099******1,1001

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Homework 18

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