Lecture Intermediate accounting (Volume 2, 11th Canadian edition) – Chapter Appendix 15: Shareholders’ equity. After studying this chapter, you should be able to: Explain how to account for par value and treasury shares, explain how to account for a financial reorganization. | 1 CHAPTER 15: SHAREHOLDERS’ EQUITY 2 CHAPTER 15: Shareholders’ Equity After studying Appendix 15A, you should be able to: 7. Explain how to account for par value and treasury shares. After studying Appendix 15B, you should be able to: 8. Explain how to account for a financial reorganization. 3 3 Par Value Shares No new share issues may have a par value attached to them (per CBCA) Par value has no link to the share market value Allowed under certain provincial business corporations acts Common in the United States Accounting issues are only for par value shares currently issued and outstanding 4 LO7 Explain how to account for par value and treasury shares. 4 Par Value Shares Issuing par value shares requires following equity accounts Preferred or Common Shares Credited with the par value amount of shares issued Contributed Surplus Difference between the par value of the shares issued and the value of asset received 5 LO7 Explain how to account for par value and treasury shares. 5 Par Value Shares 6 Given: 100 shares – par value $, issued for $1,100 cash Par value of issued shares: 100 shares x $ $ 500 Value of asset received 1,100 Contributed Surplus $ 600 LO7 Explain how to account for par value and treasury shares. 6 Par Value Shares 7 Journal Entry to Par Value Share Issue: Cash 1,100 Common Shares 500 Contributed Surplus 600 LO7 Explain how to account for par value and treasury shares. 7 Treasury Shares Repurchased shares that are not cancelled Not permitted under CBCA, but permitted in the United States and some provinces Accounted for using the single transaction method 8 LO7 Explain how to account for par value and treasury shares. 8 Single Transaction Method The repurchase and subsequent re-sale, of the shares recorded as a single transaction Treasury Share account reported as separate line item within Shareholders’ Equity section 9 LO7 Explain how to account for par value and treasury shares. 9 Accounting for Treasury Shares 10 Shares Repurchased DR | 1 CHAPTER 15: SHAREHOLDERS’ EQUITY 2 CHAPTER 15: Shareholders’ Equity After studying Appendix 15A, you should be able to: 7. Explain how to account for par value and treasury shares. After studying Appendix 15B, you should be able to: 8. Explain how to account for a financial reorganization. 3 3 Par Value Shares No new share issues may have a par value attached to them (per CBCA) Par value has no link to the share market value Allowed under certain provincial business corporations acts Common in the United States Accounting issues are only for par value shares currently issued and outstanding 4 LO7 Explain how to account for par value and treasury shares. 4 Par Value Shares Issuing par value shares requires following equity accounts Preferred or Common Shares Credited with the par value amount of shares issued Contributed Surplus Difference between the par value of the shares issued and the value of asset received 5 LO7 Explain how to account for par value and treasury shares. 5 Par .
