unit 7 wb solution
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ACCTBA WORKBOOK SOLUTIONS BY CHAPTER -LASALLE-TRANSCRIPT
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SOLUTION MANUAL
Unit 7
TREASURY SHARES
Exercise 7 1 Review Questions1. Treasury shares are shares issued to stockholders but are later re-acquired by the issuing
corporation.2. A corporation re-acquires its own shares of stocks for the following reasons:
a. To obtain stock to be used in acquisition of plant assets.b. To improve earnings per share by reducing the number of shares outstanding.c. To invest excess cash temporarily.d. To support the market price of the stock.e. To increase the ratio of liabilities to stockholders equity.f. To obtain shares for conversion of other securities such as preferred stock.
3. Treasury share may be acquired either by purchase or by donation.4. The two accounting methods of recording treasury share are the cost method and the par value
method. The method prescribed under Philippine accounting standards is the cost method.
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5. Treasury share is shown under the shareholders equity section of the statement of financial position as a deduction.
6. If a corporation acquires treasury share, retained earnings/accumulated profits must be appropriated equal to the cost of the treasury share acquired.
Exercise 7 2 Multiple Choice
1 D 6 C2 A 7 A3 C 8 C4 C 9 A5 C 10 C
Journal Entries
Exercise 7 -3a Cash 96,000
Share Capital-Ordinary 80,000 Share Premium-Ordinary 16,000
b Treasury Share-Ordinary 21,0002
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Cash 21,000
c Cash 9,600 Treasury Share-Ordinary 8,400 Share Premium-Ordinary Treasury Share 1,200
d Cash 2,400Share Premium-Ordinary Treasury Share 1,200Accumulated Profit 600 Treasury Share-Ordinary 4,200
e Cash 2,000Accumulated Profit 800 Treasury Share-Ordinary 2,800
f Accumulated profits 5,600 Accumulated profits Appropriated for
OrdinaryTreasury Shares5,600
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Exercise 7 - 4a Treasury Share-Preference 26,500
Cash 26,500
b Treasury Share-Ordinary 14,000 Cash 14,000
c Cash 10,000 Treasury Share-Ordinary 8,000 Share Premium-Ordinary Treasury Share 2,000
d Cash 10,000Accumulated profits 600 Treasury Share-Preference 10,600
e Accumulated profits 24,900 Accumulated profits Appropriated for
PreferenceTreasury Shares15,900
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Accumulated profits Appropriated for OrdinaryTreasury Shares
6,000
Exercise 7 - 5 a Cash 45,000
ShareCapital-Ordinary, no par 45,000
b Received 200 donated shares from a shareholder
c Cash 3,600 Donated Shares-Ordinary 3,600
Case 7-1a Decrease in Shareholders equity by P80,000
b. Increase in total reserves by P4,000
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c. Increase in cash by P9,000
d. Appropriations of P51,200
Case 7-2
1. Sale of treasury at premium (1,000 xP12) P12,000Less Cost of treasruy (1,000xP10 ) 10,000Total share premium P2,000
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2. No effect on share premium3. Increase total share premium by P7,000.4. Balance of Treasury shares account 1,000 x P10 = P10,000
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