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IFRS Edition
Kieso, Weygandt, Warfield
Fourth Edition
Chapter 15
Equity
Prepared by
Coby Harmon
University of California, Santa Barbara
Westmont College
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Copyright ©2020 John Wiley & Sons, Inc.
Learning Objectives
After studying this chapter, you should be able to:
LO 1 Describe the corporate form and the issuance of
shares.
LO 2 Explain the accounting and reporting for treasury
shares.
LO 3 Explain the accounting and reporting issues related
to dividends.
LO 4 Indicate how to present and analyze equity.
Cash 5,000
Share Capital — Ordinary 5,000
Video Electronics issues another 500 shares for €11 per share.
Cash 5,500
Share Capital — Ordinary 5,500
Cash 15,000
Share Capital — Ordinary 5,000
Share Premium — Ordinary 10,000
Patent 150,000
Share Capital — Ordinary 100,000
Share Premium — Ordinary 50,000
Cash 120,000
Share Capital — Preference 100,000
Share Premium — Preference 20,000
ILLUSTRATION 15.5
ILLUSTRATION 15.6
• Above Cost
• Below Cost
Both increase total assets and equity.
Decision results in
• cancellation of the treasury shares and
• a reduction in the number of shares of issued shares.
Retired treasury shares have the status of authorized and
unissued shares.
1. Cash dividends.
2. Property dividends
3. Liquidating dividends.
4. Share dividends.
All dividends, except for share dividends, reduce the total
equity in the corporation.
ILLUSTRATION 15.10
ILLUSTRATION 15.11
LO 3 Copyright ©2020 John Wiley & Sons, Inc. 48
Liquidating Dividends
Any dividend not based on earnings reduces amounts paid-in
by shareholders.
ILLUSTRATION 15.12
ILLUSTRATION 15.12
ILLUSTRATION 15.13
ILLUSTRATION 15.14
ILLUSTRATION 15.15
ILLUSTRATION 15.16
ILLUSTRATION 15.17
ILLUSTRATION 15.18
ILLUSTRATION 15.19
Ratio shows how many dollars of net income the company earned
for each dollar invested by the owners.
ILLUSTRATION 15.20
ILLUSTRATION 15.21
Amount each share would receive if the company were liquidated
on the basis of amounts reported on the statement of financial
position.
ILLUSTRATION 15A.1
ILLUSTRATION 15A.2
ILLUSTRATION 15A.3
ILLUSTRATION 15A.4
ILLUSTRATION 15A.5
ILLUSTRATION 15A.6