CHAPTER 5: STATEMENT OF CHANGES IN EQUITY
Problem 5-6 (AICPA Adapted)
United Company reported the following unadjusted current assets and shareholders' equity at yearend:
Cash
600,000
Financial assets at fair value, including cost of
P300,000 of United Company shares
1,000,000
Trade accounts receivable
3,500,000
Inventory
1,500,000
Share capital
5,000,000
Share premium
2,000,000
Retained earnings
500,000
What amount should be reported as total shareholders’ equity?
a.
b.
c.
d.
7,200,000
7,500,000
7,800,000
5,200,000
Solution:
Treasury shares should be reported as a reduction of shareholders’ equity. Therefore, total
shareholders’ equity at year-end should be 7,200,000 (7,500,000 - 300,000).
Problem 5-7 (IAA)
Bronze Company provided the following information at year-end:
Share capital
Share premium
Cumulative translation adjustment - debit
Treasury shares, at cost
Retained earnings
Cumulative unrealized gain on option contract
designated as cash flow hedge
6,000,000
3,500,000
2,000,000
700,000
1,500,000
600,000
What is the shareholders' equity at year-end?
a.
b.
c.
d.
9,500,000
8,900,000
7,400,000
7,500,000
Solution:
Share capital
Share premium
Retained earnings
Cumulative unrealized gain on option contract
designated as cash flow hedge
Treasury shares, at cost
Cumulative translation adjustment - debit
Total shareholders’ equity
6,000,000
3,500,000
1,500,000
600,000
(700,000)
(2,000,000)
8,900,000
Problem 5-8 (IAA)
Silver Company provided the following information at year-end:
Share premium
Accounts payable
Preference share capital, at par
Ordinary share capital, at par
Sales
Total expenses
Treasury shares – ordinary
Dividends
Retained earnings - beginning
1,000,000
1,100,000
2,000,000
3,000,000
10,000,000
7,800,000
500,000
700,000
1,000,000
What is the shareholders' equity at year-end?
a.
b.
c.
d.
8,000,000
8,500,000
5,800,000
8,700,000
Solution:
Sales
Total expenses
Net income
Retained earnings - beginning
Dividends
Retained earnings - ending
10,000,000
(7,800,000)
2,200,000
1,000,000
(700,000)
2,500,000*
Preference share capital, at par
Ordinary share capital, at par
Share premium
Retained earnings
Treasury shares – ordinary
Total shareholders’ equity
2,000,000
3,000,000
1,000,000
2,500,000*
(500,000)
8,000,000
Problem 5-8 (AICPA Adapted)
Kalinga Company reported the following adjusted account balances at year-end:
Share capital
Share premium
Treasury shares, at cost
Actuarial loss on defined benefit plan
Retained earnings unappropriated
Retained earning appropriated
Revaluation surplus
Cumulative translation adjustment- credit
15,000,000
5,000,000
2,000,000
1,000,000
6,000,000
3,000,000
4,000,000
1,500,000
What amount should be reported as shareholder's equity at year-end?
a.
b.
c.
d.
31,500,000
32,500,000
28,500,000
25,500,000
Solution:
Share capital
Share premium
Retained earnings unappropriated
Retained earning appropriated
Revaluation surplus
Cumulative translation adjustment- credit
Treasury shares, at cost
Actuarial loss on defined benefit plan
Total shareholder’s equity
15,000,000
5,000,000
6,000,000
3,000,000
4,000,000
1,500,000
(2,000,000)
(1,000,000)
31,500,000