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P15-1 (Equity Transactions and Statement Preparation) On P15-3 (Equity Transactions and Statement Preparation) Hatch

January 5, 2015, Phelps Corporation received Company has two classes of share capital
a charter granting the right to issue 5,000 shares of $100 par value, outstanding: 8%, £20 par preference and £5 par ordinary. At
8% cumulative and non-participating December 31, 2014, the following accounts
preference shares, and 50,000 shares of $10 par value ordinary were included in equity.
shares. It then completed these transactions. Share Capital—Preference, 150,000 shares £ 3,000,000
Jan. 11 Issued 20,000 ordinary shares at $16 per share. Share Capital—Ordinary, 2,000,000 shares 10,000,000
Feb. 1 Issued to Sanchez Corp. 4,000 preference shares for the following Share Premium—Preference 200,000
assets: machinery with a fair Share Premium—Ordinary 27,000,000
value of $50,000; a factory building with a fair value of $160,000; and land Retained Earnings 4,500,000
with an appraised value The following transactions affected equity during 2015.
of $270,000. Jan. 1 30,000 preference shares issued at £22 per share.
July 29 Purchased 1,800 ordinary shares at $17 per share. (Use cost Feb. 1 50,000 ordinary shares issued at £20 per share.
method.) June 1 2-for-1 share split (par value reduced to £2.50).
Aug. 10 Sold the 1,800 treasury shares at $14 per share. July 1 30,000 ordinary treasury shares purchased at £10 per share. Hatch
Dec. 31 Declared a $0.25 per share cash dividend on the ordinary shares uses the cost method.
and declared the preference dividend. Sept. 15 10,000 treasury shares reissued at £11 per share.
Dec. 31 Closed the Income Summary account. There was $175,700 net Dec. 31 The preference dividend is declared, and an ordinary dividend of 50
income. pence per share is declared.
Instructions Dec. 31 Net income is £2,100,000.
(a) Record the journal entries for the transactions listed above. Instructions
(b) Prepare the equity section of Phelps Corporation’s statement of Prepare the equity section of the statement of financial position for
financial position as of December 31, 2015. Hatch Company at December 31, 2015.
Show all supporting computations.

P15-2 (Treasury Share Transactions and Presentation) Clemson


Company had the following equity as of
January 1, 2015.
Share capital—ordinary, €5 par value, 20,000 shares issued €100,000
Share premium—ordinary 300,000
Retained earnings 320,000
Total equity €720,000
During 2015, the following transactions occurred.
Feb. 1 Clemson repurchased 2,000 treasury shares at a price of €19 per
share.
Mar. 1 800 shares of treasury shares repurchased above were reissued at
€17 per share.
Mar. 18 500 shares of treasury shares repurchased above were reissued at
€14 per share.
Apr. 22 600 shares of treasury shares repurchased above were reissued at
€20 per share.
Instructions
(a) Prepare the journal entries to record the treasury share
transactions in 2015, assuming Clemson
uses the cost method.
(b) Prepare the equity section of the statement of financial position as
of April 30, 2015. Net income for
the first 4 months of 2015 was €130,000.
E17-13 (Journal Entries for Fair Value and Equity Methods) P17-10 (Equity Investments) Castleman Holdings, Inc. had the
Presented below are two independent following investment portfolio at January 1,
situations. 2015.
Situation 1: Hatcher Cosmetics acquired 10% of the 200,000 Evers Company 1,000 shares @ £15 each £15,000
ordinary shares of Ramirez Fashion at a total Rogers Company 900 shares @ £20 each 18,000
cost of $14 per share on March 18, 2015. On June 30, Ramirez Chance Company 500 shares @ £9 each 4,500
declared and paid a $75,000 cash dividend. Non-trading investments at cost 37,500
Fair value adjustment (7,500)
On December 31, Ramirez reported net income of $122,000 for the Non-trading investments at fair value £30,000
year. At December 31, the market price During 2015, the following transactions took place.
of Ramirez Fashion was $15 per share. The investment is classified 1. On March 1, Rogers Company paid a £2 per share dividend.
as trading. 2. On April 30, Castleman Holdings, Inc. sold 300 shares of Chance
Situation 2: Holmes, Inc. obtained significant influence over Nadal Company for £11 per share.
Corporation by buying 25% of Nadal’s 3. On May 15, Castleman Holdings, Inc. purchased 100 more shares
30,000 outstanding ordinary shares at a total cost of $9 per share on of Evers Co. at £16 per share.
January 1, 2015. On June 15, Nadal 4. At December 31, 2015, the shares had the following price per
declared and paid a cash dividend of $36,000. On December 31, share values: Evers £17, Rogers £19, and
Nadal reported a net income of $85,000 for Chance £8.
the year. During 2016, the following transactions took place.
Instructions 5. On February 1, Castleman Holdings, Inc. sold the remaining
Prepare all necessary journal entries in 2015 for both situations Chance shares for £8 per share.
6. On March 1, Rogers Company paid a £2 per share dividend.
7. On December 21, Evers Company declared a cash dividend of £3
per share to be paid in the next
P17-6 (Equity Investments) McElroy Company has the following month.
portfolio of investments at September 30, 8. At December 31, 2016, the shares had the following price per
2015, its last reporting date. shares values: Evers £19 and Rogers £21.
Trading Investments Cost Fair Value
Horton, Inc. ordinary (5,000 shares) £215,000 £200,000
Monty, Inc. preference (3,500 shares) 133,000 140,000
Oakwood Corp. ordinary (1,000 shares) 180,000 179,000
On October 10, 2015, the Horton shares were sold at a price of £54
per share. In addition, 3,000 ordinary
shares of Patriot were acquired at £54.50 per share on November 2,
2015. The December 31, 2015, fair values
were Monty £106,000, Patriot £132,000, and Oakwood £193,000. All
the investments are classified as trading.
Instructions
(a) Prepare the journal entries to record the sale, purchase, and
adjusting entries related to the trading
investments in the last quarter of 2015.
(b) How would the entries in part (a) change if the investments were
classified as non-trading?