SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 15-1

Cash ................................................................................... 4,500
Share Capital—Ordinary (300 X €10) ........................ 3,000
Share Premium—Ordinary ........................................ 1,500

BRIEF EXERCISE 15-2

(a) Cash............................................................................ 8,200
Share Capital—Ordinary .................................... 8,200
(b) Cash............................................................................ 8,200
Share Capital—Ordinary (600 X €2) .................. 1,200
Share Premium—Ordinary ................................ 7,000

BRIEF EXERCISE 15-3

WILCO CORPORATION
Equity
December 31, 2010

Share Capital—Ordinary, €5 par value ............................ € 510,000

Share Premium—Ordinary............................................... 1,320,000
Retained earnings ............................................................ 2,340,000
Less: Treasury shares ..................................................... (90,000)
Total equity ............................................................... €4,080,000

BRIEF EXERCISE 15-4

Cash .................................................................................. 13,500
Share Capital—Preference (100 X $50) ................... 5,000
Share Premium—Preference ................................... 3,100
Share Capital—Ordinary (300 X $10) ....................... 3,000
Share Premium—Ordinary ....................................... 2,400
FV of ordinary (300 X $20) ............................................... $ 6,000
FV of preference (100 X $90) ........................................... 9,000
Total FV ..................................................................... $15,000
BRIEF EXERCISE 15-4 (Continued)

Allocated to ordinary X $13,500 = $ 5,400

Allocated to preference X $13,500 = 8,100

$13,500

BRIEF EXERCISE 15-5

Land .................................................................................. 31,000

Share Capital—Ordinary (3,000 X £5) ...................... 15,000
Share Premium—Ordinary ....................................... 16,000

BRIEF EXERCISE 15-6

Cash ($60,000 – $1,500) .................................................... 58,500

Share Capital—Ordinary (2,000 X $10) ..................... 20,000
Share Premium—Ordinary ........................................ 38,500

BRIEF EXERCISE 15-7

7/1/10 Treasury Shares (100 X €87) ............................ 8,700

Cash ........................................................... 8,700

9/1/10 Cash (60 X €90) ................................................. 5,400

Treasury Shares (60 X €87)....................... 5,220
Share Premium—Treasury ....................... 180

11/1/10 Cash (40 X €83) ................................................. 3,320

Share Premium—Treasury ............................... 160
Treasury Shares (40 X €87)....................... 3,480
BRIEF EXERCISE 15-8

8/1/10 Treasury Shares (200 X $80) ....................... 16,000

Cash ...................................................... 16,000

11/1/10 Cash (200 X $70) .......................................... 14,000

Retained Earnings ....................................... 2,000
Treasury Shares ................................... 16,000

BRIEF EXERCISE 15-9

Cash .............................................................................. 61,500

Share Capital—Preference (500 X €100).............. 50,000
Share Premium—Preference ............................... 11,500

BRIEF EXERCISE 15-10

Aug. 1 Retained Earnings (2,000,000 X $1) ...............................

2,000,000
Dividends Payable ................................................. 2,000,000

Aug. 15 No entry.

Sep. 9 Dividends Payable ..........................................................

2,000,000
Cash ........................................................................ 2,000,000

BRIEF EXERCISE 15-11

Sep. 21 Equity Investments .........................................................
325,000
Unrealized Holding Gain or Loss—
OCI (R$1,200,000 – R$875,000) ............................ 325,000

Retained Earnings
(Property Dividends Declared) ....................................
1,200,000
Property Dividends Payable .................................. 1,200,000

Oct. 8 No entry.

Oct. 23 Property Dividends Payable...........................................

1,200,000
Equity Investments ................................................ 1,200,000
BRIEF EXERCISE 15-12

Apr. 20 Retained Earnings (¥500,000 – ¥125,000) .....................375,000

Share Premium—Ordinary .............................................
125,000
Dividends Payable ................................................. 500,000

June 1 Dividends Payable ..........................................................

500,000
Cash ........................................................................ 500,000

BRIEF EXERCISE 15-13

Declaration Date.
Retained Earnings ........................................................... 1,300,000
Ordinary Share Dividend Distributable ................. 200,000
Share Premium—Ordinary .................................... 1,100,000
(20,000* X $65 = $1,300,000;
( 20,000 X $10 = $200,000)
*200,000 shares X 10%

Distribution Date.
Ordinary Share Dividend Distributable .......................... 200,000
Share Capital—Ordinary ........................................ 200,000

BRIEF EXERCISE 15-14

Declaration Date.
Retained Earnings ........................................................... 4,000,000
Ordinary Share Dividend Distributable
(400,000 X $10) .................................................... 4,000,000

Distribution Date.
Ordinary Share Dividend Distributable .......................... 4,000,000
Share Capital—Ordinary ........................................ 4,000,000
 *BRIEF EXERCISE 15-15

(a) Preference shareholders would receive $60,000 (6% X

$1,000,000) and the remainder of $240,000 ($300,000 –
$60,000) would be distributed to ordinary shareholders.

(b) Preference shareholders would receive $180,000 (6% X

$1,000,000 X 3) and the remainder of $120,000 would be
distributed to the ordinary shareholders.

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 16-1

Cash (£4,000,000 X .99) .......................................................... 3,960,000

Bonds Payable ..................................................... 3,800,0
Share Premium—Conversion Equity ................. 160,0

BRIEF EXERCISE 16-2

Share Premium—Conversion Equity ................................... 20,000

Bonds Payable ...................................................................... 1,950,000
Share Capital—Ordinary (2,000 X 50 X €10) ...... 1,000,0
Share Premium—Ordinary ................................. 970,0

BRIEF EXERCISE 16-3

Share Capital—Preference (1,000 X $50) .............................. 50,000
Share Premium—Conversion Equity
($60 – $50) X 1,000 .............................................................. 10,000
Share Capital—Ordinary (2,000 X $10) ............... 20,0
Share Premium—Ordinary
($60 X 1,000) – (2,000 X $10) ............................ 40,0

BRIEF EXERCISE 16-4

Cash [2,000 X ($1,000 X 1.01)] ............................................... 2,020,000
Bonds Payable ..................................................... 1,970,0
Share Premium-Share Warrants ......................... 50,0
BRIEF EXERCISE 16-5

Cash 3,000 X (€1,000 X .98).................................................... 2,940,000

Bonds Payable ..................................................... 2,910,0
Share Premium—Stock Warrants ....................... 30,0
BRIEF EXERCISE 16-6

1/1/10 No entry

12/31/10Compensation Expense ............................................... 75,000

Share Premium—Share
Options .............................................. 75,00

12/31/11Compensation Expense ............................................... 75,000

Share Premium—Share
Options .............................................. 75,00

BRIEF EXERCISE 16-7

1/1/10 Unearned Compensation ............................. 130,000

Share Capital—Ordinary
(2,000 X $5) ........................................ 10,00
Share Premium—Ordinary
[($65 – $5) X 2,000] ............................ 120,00

12/31/10Compensation Expense ............................................... 65,000

Unearned Compensation ...................... 65,00

12/31/11Compensation Expense ............................................... 65,000

Unearned Compensation ...................... 65,00

BRIEF EXERCISE 16-8

1/1/10 Unearned Compensation .............................. 75,000

Share Capital—Ordinary........................ 10,00
Share Premium—Ordinary .................... 65,00

12/31/10Compensation Expense ............................................... 25,000

Unearned Compensation
($75,000 ÷ 3)........................................ 25,00
BRIEF EXERCISE 16-9

€1,000,000 – (100,000 X €2)

= €3.20 per share
250,000 shares

BRIEF EXERCISE 16-10

Dates Outstanding Shares Fraction Weighted Shares

Outstanding of Year
1/1–5/1 120,000 4/12 40,000
5/1–7/1 180,000 2/12 30,000
7/1–10/1 170,000 3/12 42,500
10/1–12/31 180,000 3/12 45,000
157,500

BRIEF EXERCISE 16-11

(a) (300,000 X 4/12) + (330,000 X 8/12) = 320,000

330,000 (The 30,000 shares issued in the share dividend are

assumed outstanding from the beginning of the year.)

BRIEF EXERCISE 16-12

Net income ............................................................................................ R300,0

Adjustment for interest, net of tax [R64,000 X (1 – .40)] ..................... 38,4
Adjusted net income ............................................................................. R338,4
Weighted average number of shares adjusted for
dilutive securities (100,000 + 16,000) ............................................... ÷116,0
Diluted EPS............................................................................................ R2.

BRIEF EXERCISE 16-13

Net income ........................................................................................... $270,0

Weighted average number of shares adjusted
for dilutive securities (50,000 + 10,000) .......................................... ÷ 60,0
Diluted EPS........................................................................................... $4.
BRIEF EXERCISE 16-14

Proceeds from assumed exercise of 45,000

options (45,000 X $10) ..................................................................... $450,00
Shares issued upon exercise .............................................................. 45,00
Treasury shares purchasable ($450,000 ÷ $15).................................. 30,00
Incremental shares .............................................................................. 15,00

Diluted EPS = $300,000 = $1.4

200,000 + 15,000

BRIEF EXERCISE 16-15

Earnings per share

Income from continuing operations (€600,000/100,000) ....... € 6.0
Discontinued operations loss (€120,000/100,000) ................. (1.2
Net income (€480,000/100,000) ............................................... € 4.8

*BRIEF EXERCISE 16-16

2010: (5,000 X $4) X 50% = $10,000

2011: (5,000 X $9) – $10,000 = $35,000