7252569-MIdterm-1 (dragged) 52

7252569-MIdterm-1 (dragged) 52 - will consist of the...

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Eighth Canadian Edition 15-18 G. Treasury Shares Treasury shares are not an asset. A corporation cannot own a part of itself. 1. In Canada, the CICA Handbook recommends that treasury shares, if they exist, be accounted for using the single-transaction method. This results in debiting the treasury shares account for the reacquisition cost and reporting this amount as a deduction from the total of contributed capital and retained earnings on the balance sheet. TEACHING TIP Illustration 15-2 can be used to provide an illustration of the entries required in accounting for the purchase and subsequent reissue of treasury shares. 2. Disclosure of treasury shares: Under the single-transaction method, treasury shares are shown as an unallocated reduction of shareholders' equity. H. Financial Reorganization The accounting procedure for the financial reorganization
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Unformatted text preview: will consist of the following steps: 1. The balance in the retained earnings (deficit) account is brought up to the date of the reorganization. In addition to closing any open income statement accounts, any asset write-downs related to circumstances that existed prior to the reorganization must be accounted for. 2. The updated deficit is reclassified to share capital, contributed surplus, or a separately identified account in shareholders' equity, giving retained earnings a zero balance. 3. The assets and liabilities are comprehensively revalued. New values are determined in negotiations among equity and non-equity interests. The difference between the old and new carrying values is accounted for as a revaluation adjustment and any costs directly incurred to carry out the reorganization are then recorded as share capital, contributed surplus, or a separately identified account within shareholders' equity....
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This note was uploaded on 03/28/2012 for the course ACCTG ACC423 taught by Professor Smith during the Spring '10 term at University of Phoenix.

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