Question

Exercise 15-15

Grouper Corporation’s charter authorized 1 million shares of $12 par value common shares, and 200,000 shares of 5% cumulative and non-participating preferred shares, with a par value of $100 per share. The corporation made the following share transactions through December 31, 2017: 260,000 common shares were issued for $3.64 million and 9,000 preferred shares were issued for machinery valued at $1,388,000. Subscriptions for 10,500 common shares have been taken, and 25% of the subscription price of $16 per share has been collected. The shares will be issued upon collection of the subscription price in full. In addition, 9,000 common shares have been repurchased for $15 and retired. The Retained Earnings balance is $150,000 before considering the transactions above.

A. Prepare the shareholders’ equity section of the statement of financial position in good form

B. Prepare the shareholders’ equity section of the statement of financial position in good form. Assume that the common shares and preferred shares are no par.

Answer 1

Some Background

Par vs No-Par

If the shares are par, then they will be recorded at the par value and any additional amount received on subscription is recorded in a seperate Paid-in-Capital in excess of Par Value. Whether Preferred or Common Stock.

If they are no-par, entire amount is recorded in the common stock account. If they have a stated par value and another value at which shares are issued, they should be recorded in different accounts.

Treasury Stock, any stock repurchased and kept for re-issue, and shall be reduced from Equity. but if retired, common stock and additional paid-in capital account are reduced at the price they are issued and any surplus paid is reduced from Retained Earnings.

Solution:

A. Par Values

B.No Par Values

Good luck