INTERMEDIATE
ACCOUNTING
Seventh Canadian Edition
KIESO, WEYGANDT, WARFIELD, YOUNG, WIECEK
Prepared by:
Gabriela H. Schneider, CMA
Northern Alberta Institute of Technology
Appendix 16A
Par Value and
Treasury Shares
Learning Objectives
13.
Explain accounting for par value shares.
14.
Explain accounting for treasury shares.
Par Value Shares
• No new share issues may have a par value
attached to them (per CBCA)
– Par value has no link to the share market
value
• Accounting issues are only for par values
shares currently issued and outstanding
Par Value Shares
• Issuing par value shares requires following
equity accounts
– Preferred or Common Shares
• Credited with the par value amount of shares
issued
– Contributed Surplus
• Difference between the par value of the shares
issued and the value of asset received
Par Value Shares
Given:
100 shares – par value $5.00, issued for $1,100
cash
Par value of issued shares:
100 shares x $5.00
Value of asset received
Contributed Surplus
= $ 500
1,100
$ 600
Par Value Shares
Journal Entry to Par Value Share Issue:
Cash
1,100
Common Shares
Contributed Surplus
500
600
Treasury Shares
• Repurchased shares that are not cancelled
• Not permitted under CBCA, but permitted in
U.S. and some provinces
• Accounted for using the single transaction
method
Single Transaction Method
• The repurchase, and subsequent re-sale, of
the shares recorded as a single transaction
• Treasury Share account reported as separate
line item within Shareholders’ Equity section
Accounting for Treasury Shares
Shares Repurchased
Dr. Treasury Shares
Cr.
Cash, etc.
Shares Re-sold
Dr. Cash
Cr.
Treasury Shares
If shares are sold for an amount
different from the repurchase price?
Accounting for Treasury Shares
Treasury Shares Re-Sold
• May be sold for more (or less) than paid when
re-purchased
• If sold for more, Contributed Surplus is credited
• If sold for less, debit Contributed Surplus (and
Retained Earnings)
Reporting Treasury Shares
Shareholders’ Equity:
Share Capital (Common
and Preferred)
Retained Earnings
$x,xxx
x,xxx
x,xxx
Less: Cost of Treasury Shares
Total Shareholders’ Equity
xxx
$x,xxx
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