1 CONCEPTS AND TERMINOLOGIES 1. What are the major types of shares? 2. What are the differences between Authorized shares, issued shares, and outstanding shares? 3. What is the difference between par value and stated value? 4. According to your textbook, there are two types of dividends, what are these types and when do corporations use them? 5. The accounting standards classified share dividends into small share dividends and large share divides, what are the percentages used to distinguish between these two types? 6. In which cases/cases do companies use the share premium account? 7. What are the differences between cumulative and non-cumulative preference shares? 8. For dividends purposes, there are three important dates. Indicate these dates along with a short description of each date. 9. What is the difference between Share Capital-Ordinary shares, and Ordinary shares dividends distributional? when do we use each one of them? 10. The corporation's equity section is composed of several accounts. What are the accounts that must be presented under the equity section? 11. Define Share Split, and what is the difference between share split and reverse share split? 12. What does Dividends in arrears means? 13. What does Prior Period Adjustments (PPA) mean? when should be used and where should it be presented? 2 ACCOUNTING FOR ORDINARY SHARES 2.1 Issuing Ordinary Shares for Cash 2.1.1 Issuing Par Value Ordinary Shares at Par for Cash? 1. What are the major accounts that will be affected by issuing Ordinary Shares at par value for Cash? 2. Assume that "ABC" Corporation issues 1,000 shares of 1 par value ordinary shares. Prepare the entry to record this transaction. 2.1.2 Issuing Par Value Ordinary Shares above Par for Cash? 1. What are the major accounts that will be affected by issuing Ordinary Shares above par value for Cash? 2. Assume that "ABC" Corporation issues 1,000 shares of 1 par value ordinary shares at 6. Pre- pare the entry to record this transaction. 2.1.3 Issuing No Par, No stated Value Ordinary Shares for Cash? 1. What are the major accounts that will be affected by issuing no par, no stated ordinary shares for Cash? 2. Assume that "ABC" Corporation issues 1,000 shares at 6. Prepare the entry to record this trans- action (the shares have no par or stated values). 2.2 Issuing Ordinary Shares for Non-Cash 2.2.1 Issuing Ordinary Shares for Non-Cash (Service) Attorneys have helped Jordan Company incorporate. They have billed the company 5,000 for their services. They agree to accept 4,000 shares of 1 par value ordinary shares in payment of their bill. At the time of the exchange, there is no established market price for the shares. Prepare the journal entry for this transaction. 2.2.2 Issuing Ordinary Shares for Non-Cash (Non-Cash Assets) Athletic Research AG is an existing publicly held corporation. Its 5 par value shares are actively traded at 8 per share. The company issues 10,000 shares to acquire land recently advertised for sale at 90,000. Prepare the journal entry for this transaction. 3 ACCOUNTING FOR PREFERENCE SHARES 3.1 Issuing Preference Shares for Cash 3.1.1 Issuing Par Value Preference Shares at Par for Cash? 1. What are the major accounts that will be affected by issuing Preference Shares at par value for Cash? 2. Assume that "ABC" Corporation issues 1,000 Preference shares of 1 par value ordinary shares. Prepare the entry to record this transaction. 3.1.2 Issuing Par Value Preference Shares above Par for Cash? 1. What are the major accounts that will be affected by issuing Preference Shares above par value for Cash? 2. Assume that "ABC" Corporation issues 1,000 Preference shares of 1 par value ordinary shares at 6. Prepare the entry to record this transaction. 2 3.1.3 Issuing No Par, No stated Value Preference Shares for Cash? 1. What are the major accounts that will be affected by issuing no par, no stated preference shares for Cash? 2. Assume that "ABC" Corporation issues 1,000 Preference shares at 6. Prepare the entry to record this transaction (the shares have no par or stated values). 4 ACCOUNTING FOR TREASURY SHARES Salvador SA purchases 3,000 shares of its $50 par value ordinary shares for $180,000 cash on July 1. It will hold the shares in the treasury until resold. On November 1, the corporation sells 1,000 treasury shares for cash at $65 per share. On December 1, the corporation sells 2,000 treasury shares for cash at $53 per share. 1. What are the characteristics of the treasury shares accounts? 2. Journalize the treasury share transactions. 5 DIVIDENDS 5.1 Cash Dividends Fields Enterprises has 70,000 ordinary shares outstanding. It declares a 1.5 per share cash dividend on November 1 to shareholders of record on December 1. The dividend is paid on December 31. 1. What are the accounts that will be used on the declaration date? 2. What are the accounts that will be used on the record date? 3. What are the accounts that will be used on the payment date? 4. Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend. 5.1.1 Preference Shares dividends MasterMind SA has 3,000 shares of 6%, 100 par value preference shares outstanding on December 31, 2017. On December 31, 2017, the company declared a 60,000 cash dividend. 1. What does the 6% indicates? 2. Determine the dividend paid to preference shareholders and ordinary shareholders under each of the following scenarios. a) The preference shares are non-cumulative, and the company has not missed any divi- dends in previous years. b) The preference shares are non-cumulative, and the company did not pay a dividend in each of the two previous years. c) The preference shares are cumulative, and the company did not pay a dividend in each of the two previous years. 5.2 Share Dividends 5.2.1 Small share Dividends Valiant Ltd. has 56,000 10 par value ordinary shares outstanding. It declares a 10% share divi- dend on December 1 when the market price per share is 16. The dividend shares are issued on December 31. 1. Why did we classify the above dividends as small share dividends? 2. What are the accounts that will be used on the declaration date? 3 3. What are the accounts that will be used on the record date? 4. What are the accounts that will be used on the payment date? 5. Prepare the entries for the declaration and payment of the share dividend. 5.2.2 Large share Dividends Valiant Ltd. has 56,000 10 par value ordinary shares outstanding. It declares a 30% share divi- dend on December 1 when the market price per share is 16. The dividend shares are issued on December 31. 1. Why did we classify the above dividends as large share dividends? 2. What are the accounts that will be used on the declaration date? 3. What are the accounts that will be used on the record date? 4. What are the accounts that will be used on the payment date? 5. Prepare the entries for the declaration and payment of the share dividend. 5.2.3 Allocating Cash Dividends Between Preference And Ordinary Shares "ABC" Corporation paid cash dividends totaling $150,000 in 2012 and $75,000 in 2013. In 2014, Taylor intends to pay cash dividends of $800,000. Compute the amount of cash dividends per share to be received by ordinary shareholders in 2014 under each of the following assumptions. Treat each case independently. There were no dividends in arrears as of January 1, 2012. 1. 25,000 shares of ordinary: 100,000 shares of 6 percent, $50 par cumulative preference. 2. 25,000 shares of ordinary; 50,000 shares of 6 percent, $50 par noncumulative preference. 3. 25,000 shares of ordinary: 70,000 shares of 6 percent, $100 par cumulative preference. 6 SHARE SPLIT 1. Indicate Three reasons for conducting a share split? 2. What is the journal entry required to record the share split? 3. What does this statement" "ABC" Corporation announced a 5-for-1 share split.", and what is the impact on par value and number of shares? 4. What does this statement" "ABC" Corporation announced a 1-for-5 share split.", and what is the impact on par value and number of shares? 7 EQUITY SECTION The following accounts appear in the ledger of Tiger Ltd. after the books are closed at December 31. Share Capital-Ord, 1 stated, 400,000 authorized; 300,000 issued.. . 300,000 Ordinary Share Dividends Distributable. Share Premium-Ordinary........ ..30,000 .1,200,000 150,000 Share Capital-Preference, 5 par value, 8%, 40,000 authorized; 30,000 issued. Retained Earnings..... Treasury Shares (10,000 shares) .800,000 65,000 50,000 Share Premium-Preference. Based on the above-given information, prepare the equity section on December 31, 4 8 RETAINED EARNINGS STATEMENT "ABC" retained earnings of 5,130,000 on January 1, 2017. During the year, "ABC" earned 2,000,000 of net income. It declared and paid a 250,000 cash dividend. In 2017, "ABC" recorded an adjustment of 180,000 due to the understatement (from a mathematical error) of the 2016 depreciation expense. Based on the above-given information, prepare a retained earnings statement for 2017