Algonquin Corporations sold 50,000 common shares on a subscription basis for $40
ID: 2453430 • Letter: A
Question
Algonquin Corporations sold 50,000 common shares on a subscription basis for $40 per share. By December 31, 2014, collections on these subscriptions totalled $1.3 million. None of the subscriptions has been paid in full so far. Algonquin is a private company.
Instructions:
(a) Discuss the meaning of the account Common Shares Subscribed and indicate how it is reported in the financial statements.
(b) Discuss the arguments in favour of reporting Subscriptions Receivable as a current asset.
(c) Discuss the arguments in favour of reporting Subscriptions Receivable as a contra equity account.
(d) Indicate how these 50,000 shares would be presented on Algonquin’s December 31, 2014 balance sheet under the method discussed in (c) above.
(e) Suppose that Algonquin also has a benefit plan that allows employees to purchase shares of the company, and take two years to pay for the shares. When an employee agrees to purchase the shares, the shares are shown as issued and an Employee Share Loan Receivable Account is set up. As payments are made by the employee, this loan receivable account is reduced. Discuss the reporting issues related to this receivable account under IFRS and ASPE.
Only really need help on (d) and (e)
Explanation / Answer
Answer:(d)
Answer:(e) Under IFRS, equity is defined under the Framework for Preparation and Presentation of Financial Statements. Under PE GAAP, a definition of equity is provided in the CICA Handbook , Part II, Section 1000.
Algonquin’s Balance sheet 31-Dec-14 Stockholder's equity: Common stock (50000 shares, $40 per share) 2000000 Less: Subscription receivable 1300000 Total stockholder equity 700000Related Questions
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