1. How will the $600,000 15-year mortgage outstanding be reported on Bramble Co.'s July 31, 2024, statement of financial position?
2. What is the effect of Carla Vista Inc. repurchasing 10,800 shares at $10 per share on total shareholders' equity?
1. The mortgage will be reported on the July 31, 2024, statement of financial position as follows: Non-current liabilities: $568,200.
2. The effect of Carla Vista Inc. repurchasing 10,800 shares at $10 per share will result in a decrease to total shareholders' equity of $118,800.
Impact of Mortgage Reporting
The mortgage outstanding for Bramble Co. is $600,000, but over the next year, the company will repay $31,800 of the principal amount. This means that the remaining principal amount after the next year will be $600,000 - $31,800 = $568,200. The $568,200 will be reported under non-current liabilities because it represents the portion of the mortgage that is due beyond one year from the reporting date.
Effect of Share Repurchase
When Carla Vista Inc. issues 120,000 shares at $11 per share, they receive $1,320,000. Later in the year, the company repurchases 10,800 shares at $10 per share, amounting to $108,000. This repurchase results in a decrease in the share capital account by $108,000, leading to a reduction in total shareholders' equity by $118,800.
In conclusion, the mortgage will be reported as a non-current liability of $568,200, and the share repurchase will decrease total shareholders' equity by $118,800.