1. Donnelly Corporation is authorized to issue 1,000,000 ordinary ...

1.
Donnelly Corporation is authorized to issue 1,000,000 ordinary shares with a $1 par
value. During 2010, the company has the following share transactions.
Jan. 15
Sept. 5
Issued 400,000 ordinary shares at $7 per share.
Purchased 30,000 ordinary shares for the treasury at $8 per share.
Instructions
Journalize the transactions for Donnelly Corporation.
Solution
Jan. 15 Cash ................................................................................... 2,800,000
Share Capital–Ordinary.............................................. 400,000
Share Premium–Ordinary........................................... 2,400,000
Sept. 5 Treasury Shares ................................................................. 240,000
Cash .......................................................................... 240,000
Ex. 2
The following selected transactions pertain to Nesley Corporation:
Jan. 3 Issued 100,000 ordinary shares, €10 par value, for €22 per share.
Feb. 10
Issued 6,000 ordinary shares, €10 par value, in exchange for special
purpose equipment. Nesley Corporation's ordinary shares has been
actively traded on the share exchange at €25 per share.
Instructions
Journalize the transactions.
Solution
January 3
Cash .................................................................................................... 2,200,000
Share Capital–Ordinary .............................................................. 1,000,000
Share Premium–Ordinary .......................................................... 1,200,000
(To record issuance of ordinary shares in excess of par)

February 10
Equipment .......................................................................................... 150,000
Share Capital–Ordinary .............................................................. 60,000
Share Premium–Ordinary .......................................................... 90,000
(To record issuance of shares for equipment)
3
The following items were shown on the statement of financial position of Herman
Corporation on December 31, 2011:
Equity
Share Capital–Ordinary, €5 par value, 360,000 shares
authorized; ______ shares issued and ______ outstanding .............................. €1,550,000
Share Premium–Ordinary.................................................................................. 165,000
Retained Earnings............................................................................................. 750,000
Less: Treasury Shares (18,000 shares)........................................................... (180,000)
Total Equity............................................................................................ €2,285,000

Instructions
Complete the following statements and show your computations.
(a) The number of ordinary shares issued was _______________.
(b) The number of ordinary shares outstanding was ____________.
(c) The sales price of the ordinary shares when issued was €____________.
(d) The cost per treasury share was €_______________.
(e) The average issue price of the ordinary shares was €______________.
(f) Assuming that 25% of the treasury shares is sold at €20 per share, the balance in
the Treasury Shares account would be €_______________.
Solution
(a) The number of ordinary shares issued was 310,000.
€1,550,000 ÷ €5 par value = 310,000 shares issued.
(b) The number of ordinary shares outstanding was 292,000.
310,000 issued less 18,000 in treasury = 292,000 shares outstanding
(c) The sales price of the ordinary shares when issued was €1,715,000.
Share capital €1,550,000
Plus: share premium 165,000
Total €1,715,000
(d) The cost per treasury share was € 10.
€180,000 ÷ 18,000 = €10 per share.
(e) The average issue price of the ordinary shares was €5.53.
€1,715,000 ÷ 310,000 shares = €5.53 per share.
(f)
Assuming 25% of the treasury shares is sold at €20 per share, the balance in the
Treasury Shares account would be €135,000.
13,500 shares × €10 = €135,000.

4
On January 1, 2011, Fairly Company issued 30,000 ordinary shares with a $2 par
value for $150,000. On March 1, 2011, the company purchased 6,000 ordinary shares
for $8 per share for the treasury. On June 1, 2011, 1,500 of the treasury shares are
sold for $10 per share. On September 1, 2011, 3,000 treasury shares are sold at $6
per share.
Instructions
Journalize the share transactions of Fairly Company in 2011.
Solution
Jan. 1 Cash ................................................................................... 150,000
Share Capital–Ordinary.............................................. 60,000
Share Premium–Ordinary........................................... 90,000
March 1 Treasury Shares ................................................................. 48,000
Cash .......................................................................... 48,000
June 1 Cash ................................................................................... 15,000
Treasury Shares......................................................... 12,000
Share Premium–Treasury .......................................... 3,000
Sept. 1 Cash ................................................................................... 18,000
Share Premium–Treasury................................................... 3,000
Retained Earnings .............................................................. 3,000
Treasury Shares......................................................... 24,000
5
Richman Corporation has 120,000 ordinary shares with a €5 par value outstanding. It
declared a 10% share dividend on June 1 when the market price per share was €12.
The shares were issued on June 30.
Instructions
Prepare the necessary entries for the declaration and payment of the share dividend.

Solution
June 1 Share Dividends (120,000 × .10 × €12)............................... 144,000
Ordinary Share Dividends Distributable...................... 60,000
Share Premium–Ordinary........................................... 84,000
June 30 Ordinary Share Dividends Distributable .............................. 60,000
Share Capital–Ordinary.............................................. 60,000
6.
Derek Corporation was organized on January 1, 2010. During its first year, the
corporation issued 40,000 preference shares with a $5 par value and 400,000 ordinary
shares with a $1 par value. At December 31, the company declared the following cash
dividends:
2010 $ 8,000
2011 $30,000
2012 $70,000
Instructions
(a) Show the allocation of dividends to each class of shares, assuming the preference
shares dividend is 5% and not cumulative.
(b) Show the allocation of dividends to each class of shares, assuming the preference
shares dividend is 6% and cumulative.
(c) Journalize the declaration of the cash dividend at December 31, 2012 using the
assumption of part (b).
Solution
(a) Preference Ordinary Total
2010 $ 8,000 $ -0- $ 8,000
2011 10,000 20,000 30,000
2012 10,000 60,000 70,000

(b) Preference Ordinary Total
2010 $ 8,000 $ -0- $ 8,000
2011 16,000 14,000 30,000
2012 12,000 58,000 70,000
(c) Cash Dividends ........................................................................... 70,000
Preference Dividends Payable............................................ 12,000
Ordinary Dividends Payable................................................ 58,000