Prepare the journal entry to record the share repurchase

Assignment Help Financial Accounting

Reference no: EM133433631

Question: Shareholders' Equity

Below informationfrom the statements of financial position of Ross Ltd.

	December 30	December 30
	2014	2013
Shareholders' Equity
Share capital	$ 603,287,000	$ 603,861,000
Contributed surplus	0	6,751,000
Retained earnings	1,102,300,000	916,795,000
Total shareholders' equity	$1,705,587,000	$1,520,656,000

Net earnings for the year ended December 30^th, 2014 is $283,957,000.

The following is part ofthe Share Capital note from 2014 financial statements:

"During the year ended December 30, 2014, the Corporation purchased and cancelled a total of 1,435,150 common voting shares for total cash consideration of $39,431,000. The average book value of the shares repurchased was $4.70 per share. The excess of the market price over the average book value was $32,685,795."

Required (show all the calculations):

Prepare the journal entry to record the share repurchase transaction.
Why do you think the Company decided to repurchase the shares? State all the reasons you can think of.
Did the Company declare any dividend in fiscal year 2014? If so, compute the amount of dividends declared by the company.
Assume, that the company is consideringthe three following coursesof actions:
1. Paying a $0.50 cash dividend
2. Distributing a 5% stock dividend
3. Effecting a 2-for-1 stock split.

Management would like to increase investors' interest in the shares without diluting the ownership for current shareholders. At the same time, they would like to maintain their plans to expand the operations. Explain how each of the abovementioned courses of actions will affect (i.e., increase, decrease or no effect): common shares, retained earnings and market price per share. Which course of action would you recommend to management? (no points will be awarded for only providing the effect).

Reference no: EM133433631

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