Brief Exercise 18–5
Horton’s total paid-in capital will decline by $17 million, the price paid to buy
back the shares.
Journal entry (not required):
($ in millions)
Common stock (2 million shares x $1 par)……………………………. 2
* Paid-in capital—excess of par: $900 ÷ 100 million shares
Brief Exercise 18–6
Agee’s total paid-in capital will decline by $18 million because recording the
transaction involves a $1 million reduction of retained earnings and an $18
million reduction in paid-in capital accounts.
Journal entries (not required):
First buyback ($ in millions)
Common stock (1 million shares x $1 par)……………………………. 1
* $16 – $1 par
Second buyback
Common stock (1 million shares x $1 par)……………………………. 1
* $16 – $1 par
Brief Exercise 18–7
Jennings’s retained earnings will decline by $2 million because the $67 million
sale price is less than the sum of the cost of the treasury stock ($70 million)
and paid-in capital from the previous treasury stock sale ($1 million).
Journal entries (not required):
Purchase of treasury stock ($ in millions)
First sale of treasury stock
Cash (1 million shares x $71)……………………………………………… 71
Second sale of treasury stock
Cash (1 million shares x $67)……………………………………………… 67
Brief Exercise 18–8
Cox’s paid-in capital—share repurchase will increase by $7 million as
determined in the following journal entry:
($ in millions)
Cash (1 million shares x $29)……………………………………………… 29
Brief Exercise 18–9
Cox’s paid-in capital—share repurchase will increase by $9 million as
determined in the following journal entry:
($ in millions)
Brief Exercise 18–10
Declaration date ($ in millions)
Date of record
no entry
Payment date
Brief Exercise 18–11
MLS’s common shareholders’ will receive dividends of $18 million as a result
of the 2018 distribution.
Preferred Common
2016 $20 million*0
dividends in arrears.
million dividends in arrears.
Brief Exercise 18–12
Declaration date
Loss on investment ($37,000 – 35,000) …………………………. 2,000
Investment in GE stock ………………………………………… 2,000
Brief Exercise 18–13
($ in millions)
* 5% x 60 million shares = 3 million shares
Brief Exercise 18–14
If a stock split is not to be effected in the form of a stock dividend, no entry is
recorded. Since the shares double, but the balance in the common stock
account is not changed, the par per share is reduced, to $.50 in this instance.
Brief Exercise 18–15
($ in millions)
**alternatively, retained earnings may be debited
If the per share par value of the shares is not to be changed, the stock
distribution is referred to as a “stock split effected in the form of a stock
Brief Exercise 18–16
If Nestlé used U.S. GAAP:
Ordinary share capital would be common stock,
Exercise 18–1
Requirement 1
Comprehensive income is a more expansive view of the change in
shareholders’ equity than traditional net income. It is the total nonowner change in
Requirement 2
Two attributes of other comprehensive income are reported: (1) the
The second measure—the comprehensive income accumulated over the
current and prior periods—is reported in the balance sheet as a separate component
Exercises
Exercise 18–1 (continued)
Requirement 3
Kaufman’s 2018 balance sheet amount ($107 million) differs from the 2018
amount reported in the disclosure note. On the other hand, the comprehensive
($ in
millions)
Net income $xxx
Other comprehensive income:
† Changes in the fair value of some securities (described in Chapter 12).
‡ Gains and losses due to revising assumptions or market returns differing from expectations
and prior service cost from amending the plan (described in Chapter 17).
Notice that each component is reported net of its related income tax expense or
income tax benefit.
Exercise 18–1 (concluded)
Requirement 4
From the information Kaufman’s financial statements provide, we can determine
how the company calculated the $107 million accumulated other comprehensive
income in 2018:
($ in millions)
Accumulated other comprehensive income, 2017 $75