Prepared by: Gabriela H. Schneider, CMA Northern Alberta Institute of Technology INTERMEDIATE ACCOUNTING Seventh Canadian Edition KIESO, WEYGANDT, WARFIELD, YOUNG, WIECEK

Appendix 16A Par Value and Treasury Shares Appendix 16A Par Value and Treasury Shares

13.Explain accounting for par value shares. 14.Explain accounting for treasury shares. Learning Objectives

Par Value Shares No new share issues may have a par value attached to them (per CBCA)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 outstandingAccounting issues are only for par values shares currently issued and outstanding

Par Value Shares Issuing par value shares requires following equity accountsIssuing par value shares requires following equity accounts –Preferred or Common Shares Credited with the par value amount of shares issuedCredited with the par value amount of shares issued –Contributed Surplus Difference between the par value of the shares issued and the value of asset receivedDifference 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= $ 500 Value of asset received 1,100 Contributed Surplus $ 600

Par Value Shares Journal Entry to Par Value Share Issue: Cash 1,100 Common Shares500 Contributed Surplus 600

Treasury Shares Repurchased shares that are not cancelledRepurchased shares that are not cancelled Not permitted under CBCA, but permitted in U.S. and some provincesNot permitted under CBCA, but permitted in U.S. and some provinces Accounted for using the single transaction methodAccounted for using the single transaction method

Single Transaction Method The repurchase, and subsequent re-sale, of the shares recorded as a single transactionThe repurchase, and subsequent re-sale, of the shares recorded as a single transaction Treasury Share account reported as separate line item within Shareholders’ Equity sectionTreasury 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-purchasedMay be sold for more (or less) than paid when re-purchased If sold for more, Contributed Surplus is creditedIf sold for more, Contributed Surplus is credited If sold for less, debit Contributed Surplus (and Retained Earnings)If sold for less, debit Contributed Surplus (and Retained Earnings)

Reporting Treasury Shares Shareholders’ Equity: Share Capital (Common and Preferred)$x,xxx and Preferred)$x,xxx Retained Earnings x,xxx x,xxx x,xxx Less: Cost of Treasury Shares xxx Total Shareholders’ Equity$x,xxx

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