7252569-MIdterm-1 (dragged) 51

7252569-MIdterm-1 (dragged) 51 - reorganization 4...

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Eighth Canadian Edition 15-17 1. Such reacquired shares may be retired (cancelled) or, where permitted, held as treasury shares. With rare exceptions, the CBCA does not allow a corporation to hold its own shares as treasury shares. 2. CICA Handbook Section 3240 specifies the allocation of the purchase price of the reacquired shares among the share capital account, contributed surplus, and retained earnings. E. Contributed Surplus 1. Several transactions can affect the balance of contributed surplus as shown below in T-account form: Contributed Surplus Decreases (debits) Increases (credits) 1. Discounts on capital shares issued.* 1. Premiums on capital shares issued.* 2. Sale of treasury shares below cost under the circumstances and to the extent described in Chapter 16. 2. Sale of treasury shares above cost. 3. Absorption of a deficit in a financial reorganization 3. Additional capital arising in a financial
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Unformatted text preview: reorganization. 4. Distribution of a liquidating dividend. 4. Additional assessments on shareholders. 5. Retirement of shares at a cost in excess of par* or assigned value. 5. Issue of convertible bonds or preferred shares. 6. Capital donations from non-shareholders. 7. Retirement of shares acquired by purchase at a cost less than par* or assigned value or through donations. * Items relate to shares having a par value (See Appendix 16A for further explanation). 2. Analyze shareholders’ equity: Several ratios use shareholders’ equity to evaluate a company’s profitability and long-term solvency. The chapter discusses four ratios: a) rate of return on common shareholders’ equity, b) payout ratio, c) price earnings ration, and d) book value per share. F. Accounting for Par Value Shares (Appendix 15A)—Where Permitted by Law Par value establishes the nominal value per share and is the minimum amount that must be paid by each shareholder....
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