CHAPTER 15 Stockholders’ Equity ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Stockholders’ rights; corporate form. Stockholders’ equity. 4, 5, 6, 16, 17, 18 3 7, 10, 16, 17 1, 2, 3, 9 3. Issuance of shares.

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7, 10 1, 2, 6 1, 2, 4, 6, 9 1, 3, 4 4. Noncash stock transactions; lump sum sales. 8, 9 4, 5 3, 4, 5, 6 1, 4 2 5.

Treasury stock transactions, cost method. 11, 12, 17 7, 8 3, 6, 7, 9, 10, 18 1, 2, 3, 5, 6, 7 7 6. Preferred stock. 3, 13, 14, 15 9 8 1, 3 10, 11, 17 9, 11, 12 1 7. Stockholders’ equity accounts; classifications; terminology. Dividend policy.

19, 20, 21, 22, 25, 26 10 12, 15, 16 7, 10 9. Cash and stock dividends; stock splits; property dividends; liquidating dividends. 22, 23, 24 10, 11, 12, 13, 14 13, 14, 15, 18 6, 7, 8, 10, 11 10. Restrictions of retained earnings. 27, 28 4, 5, 6 9 11.

Dividend preferences and book value. 3 17, 19, 20 29 15 21, 22, 23, 24.This material is covered in an Appendix to the chapter. Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 15-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives Brief Exercises Questions Exercises Problems Concepts for Analysis 1. Discuss the characteristics of the corporate form of organization.

1, 2, 3 CA15-1 2. Identify the key components of stockholders’ equity. 4, 5 CA15-3 3.

Explain the accounting procedures for issuing shares of stock. 6, 7, 8, 9, 10, 11 1, 2, 4, 5, 6 1, 2, 3, 4, 5, 6, 8, 9, 10 1, 3, 4, 9, 12 CA15-2 4. Describe the accounting for treasury stock. 12 3, 7, 8 6, 7, 9, 10, 18 1, 2, 3, 5, 6, 7, 9, 12 CA15-6, CA15-7 5. Explain the accounting for and reporting of preferred stock.

13, 14, 15, 16, 17, 18 9 5, 8 4 6. Describe the policies used in distributing dividends. 19, 20, 21, 22 10, 11, 12 16 7. Identify the various forms of dividend distributions.

23, 24 11, 12 11, 12, 15, 16, 18 3, 6, 7, 8, 9, 11, 12 8. Explain the accounting for small and large stock dividends, and for stock splits. 25, 26, 27, 28 13, 14 11, 13, 14, 15, 16, 18 3, 8, 10, 11, 12 9. Indicate how to present and analyze stockholders’ equity.

29 3 17, 19, 20 1, 2, 6, 9, 11, 12.10. Explain the different types of preferred stock dividends and their effect on book value per share. 15 8, 21, 22, 23, 24 15-2 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual CA15-4, CA15-5, CA15-6 (For Instructor Use Only) SOLUTIONS TO CODIFICATION EXERCISES CE15-1 Master Glossary (a) A security that is convertible into another security based on a conversion rate.

For example, convertible preferred stock that is convertible into common stock on a two-for-one basis (two shares of common for each share of preferred). (b) An issuance by a corporation of its own common shares to its common shareholders without consideration and under conditions indicating that such action is prompted mainly by a desire to give the recipient shareholders some ostensibly separate evidence of a part of their respective interests in accumulated corporate earnings without distribution of cash or other property that the board of directors deems necessary or desirable to retain in the business. A stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders; that is, the corporation’s property is not diminished and the interests of the stockholders are not increased.

The proportional interest of each shareholder remains the same. (c) An issuance by a corporation of its own common shares to its common shareholders without consideration and under conditions indicating that such action is prompted mainly by a desire to increase the number of outstanding shares for the purpose of effecting a reduction in their unit market price and, thereby, of obtaining wider distribution and improved marketability of the shares. Sometimes called a stock split-up. (d) Contractual rights of security holders to receive dividends or returns from the security issuer’s profits, cash flows, or returns on investments. CE15-2 According to FASB ASC 505-20-25-3 (Stock Dividends and Stock Splits): 25-3 The point at which the relative size of the additional shares issued becomes large enough to materially influence the unit market price of the stock will vary with individual entities and under differing market conditions and, therefore, no single percentage can be established as a standard for determining when capitalization of retained earnings in excess of legal requirements is called for and when it is not. Except for a few instances, the issuance of additional shares of less than 20 or 25 percent of the number of previously outstanding shares would call for treatment as a stock dividend as described in paragraph 505-20-30-3. CE15-3 According to FASB ASC 340-10-S99-1 (Deferred Costs and Other Assets—SEC Materials): Specific incremental costs directly attributable to a proposed or actual offering of securities may properly be deferred and charged against the gross proceeds of the offering.

However, management salaries or other general and administrative expenses may not be allocated as costs of the offering and deferred costs of an aborted offering may not be deferred and charged against proceeds of a subsequent offering. A short postponement (up to 90 days) does not represent an aborted offering. 15-4 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) CE15-4 According to FASB ASC 505-30-25-7 (Treasury Stock—Recognition): 25-7 After an entity’s repurchase of its own outstanding common stock, sometimes it may either retire the repurchased shares and issue additional common shares, or, as an alternative, resell the repurchased shares. In either case, the price received may differ from the amount paid to repurchase the shares. While the net asset value of the shares of common stock outstanding in the hands of the public may be increased or decreased by such repurchase and retirement, such transactions relate to the capital of the corporation and do not give rise to corporate profits or losses.

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There is no essential difference between the following: a. The repurchase and retirement of a corporation’s own common stock and the subsequent issue of common shares. The repurchase and resale of its own common stock. Copyright © 2013 John Wiley & Sons, Inc.

Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 15-5 Questions Chapter 15 (Continued) 10. The direct costs of issuing stock, such as underwriting costs, accounting and legal fees, printing costs, and taxes, should be reported as a reduction of the amounts paid in. Issue costs are therefore debited to Paid-in Capital in Excess of Par—Common Stock because they are unrelated to corporate operations. The major reasons for purchasing its own shares are: (1) to provide tax-efficient distributions of excess cash to shareholders, (2) to increase earnings per share and return on equity, (3) to provide stock for employee stock compensation contracts or to meet potential merger needs, (4) to thwart takeover attempts or to reduce the number of stockholders, and (5) to make a market in the stock. (a) Treasury stock should not be classified as an asset since a corporation cannot own itself. (b) The “gain” or “loss” on sale of treasury stock should not be treated as additions to or deductions from income.

If treasury s.

Kieso Intermediate Accounting 16e Solutions

Product categories.