On January 1, 2017, Renewable Corporation had the following Shareholders\' Equit

Question

On January 1, 2017, Renewable Corporation had the following Shareholders' Equity accounts: Contributed Capital: Preferred shares, no par value, $.25 dividend cumulative, convertible into 100,000 common shares, callable at any time after issue, unlimited shares authorized, 100,000 issued and outstanding Common shares, no par value, unlimited shares authorized, 32,000 issued and outstanding Contributed Surplus-redemption of preferred shares $260,000 Total contributed capital Retained Earnings Total Shareholders' Equity 175,000 16,000 451,000 3,200,000 $3,651,000 Prepare Journal entries for each of the following entries (4 marks): I. On January 15, 2017, Renewable Corporation issued a common stock dividend of 10% based on the initial recorded common share balances. Using a market value of $5.5 per share, assume that 3,000 whole shares were issued along with 200 fractional rights, valued at equivalent whole shares). 2. On January 18, 2017 Renewable Corporation shareholders chose to convert 14,000 preferred shares into common shares on a one to one basis. The MV of preferred at the time is $2.5 and of common is $5.5 3. On December 1, 2017 Renewable Corporation declared $120,000 in dividends. Dividends are recorded in separate liability accounts for each class of shareholder. There are two years of dividends in arrears. DATE

Explanation / Answer

Date

Particulars

Debit ($)

Credit ($)

15.01.2017

Retained earnings

17600

Dividend equity

17600

(Being equity dividend issued)

(3000+200) X 5.5

Dividend equity

17600

Common stock

17600

(Being the common stock from dividend issued)

18.01.2017

Preferred share capital

36400

Retained earnings

40600

14000 x (5.5-2.6)

Common stock

77000

(Being preferred stock converted into common stock)

01.12.2017

Accumulated profit / retained earnings

120000

Preferred dividend

71500

Common dividend

48500

(Being common and preferred dividend issued)

Preferred dividend

71500

Common dividend

48500

Bank

120000

(Being common and preferred dividend paid)

Workings:

Dividend outstanding

Preferred shares

100000

Dividend

0.25 per share

Preferred dividend

25000

Number of years

2

Dividend outstanding

50000

Current dividend

Preferred stock

100000

Less: Number of share converted

14000

86000

Divined for 2017

21500

Total preferred dividend

71500

thus, common dividend

Total dividend

120000

Less: Total preferred dividend

71500

48500

Date

Particulars

Debit ($)

Credit ($)

15.01.2017

Retained earnings

17600

Dividend equity

17600

(Being equity dividend issued)

(3000+200) X 5.5

Dividend equity

17600

Common stock

17600

(Being the common stock from dividend issued)

18.01.2017

Preferred share capital

36400

Retained earnings

40600

14000 x (5.5-2.6)

Common stock

77000

(Being preferred stock converted into common stock)

01.12.2017

Accumulated profit / retained earnings

120000

Preferred dividend

71500

Common dividend

48500

(Being common and preferred dividend issued)

Preferred dividend

71500

Common dividend

48500

Bank

120000

(Being common and preferred dividend paid)

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