The shareholders’ meeting for Harris Corporation has been in progress for some Lime. The chief financial officer for Harris is presently reviewing the company’s financial statements and is explaining the items that comprise the equity section of the statement of financial position for the current year. The equity section of Harris Corporation at December 31, 2011, is shown below. HARRIS CORPORATIONStatement of Financial Position (partial)December 31, 2011 Share capital—preference, authorized 1,000,000 shares cumulative, $100 par value. $8 per share, 6,000 shares issued and outstanding ………….. $ 600,000 Share capital—ordinary authorized 5,000,000 shares, $1 par value. 3.000.000 shares issued, and 2,700,000 outstanding ………………… 3.000,000Share premium—preference ………….. 50,000Share premium—ordinary …………… 25,000,000Retained earnings ……………… 900,000Less: Treasury shares (300,000 shares) ………. 9,300,000Total equity …………………$20,250,000At the meeting, shareholders have raised a number of questions regarding the equity section. Instructions With the class divided into groups, answer the following questions as if you were the chief financial officer for Harris Corporation. (a) “What does the cumulative provision related to the preference shares mean?” (b) “I thought the ordinary shares were presently selling at $29.75, but the company has the shares stated at $1 per share. How can that be?” (c) “Why is the company buying back its ordinary shares? Furthermore, the treasury shares have a debit balance because it is subtracted from equity. Why are treasury shares not reported as an asset if it has a debit balance?” (d) “Why is it necessary to show share premium? Why not just show shares at the total amount paid in?”View Solution:
The shareholders meeting for Harris Corporation has been in pro



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