Question :Hi the question as it is from book of accounting page 629 ( financial
ID: 2596086 • Letter: Q
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Question :Hi the question as it is from book of accounting page 629 ( financial accounting tools for business descion making kimmel) problem 11-3A
Problem 11-3A
largent Corporation, a publicly traded company, is authorized to issue 200,000 $4 cumulative preferred shares and an unlimited number of common shares. On January 1, 2018, the general ledger contained the following shareholders’ equity accounts:
The following equity transactions occurred in 2018:
(a)
Record the above transactions, including any entries required to close dividends and net income. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round average cost per share to 2 decimal palces, e.g. 2.25 and final answers to 0 decimal places.)
(b) Open T accounts and post to the shareholders’ equity accounts. (Record entries in the order presented in the problem.)
(c)Prepare the statement of changes in equity for the year. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
(d)Prepare the shareholders’ equity section of the statement of financial position at December 31. (Enter account name only and do not provide descriptive information.)
Preferred shares (8,000 shares issued) $440,000 Common shares (70,000 shares issued) 1,050,000 Contributed surplus 25,000 Retained earnings 800,000 Accumulated other comprehensive income 10,000Explanation / Answer
a. Journal entries:
Date
Account title
Debit
Credit
6-Feb
Cash
600,000
Preference shares
600,000
6-Apr
Cash
570,000
Common shares
570,000
22-April
Common shares (1,050,000/70,000= $15per share*3,000Shares)
45,000
Retained earnings
6,000
Cash
51,000
29-May
Cash dividend
36,000
Dividend payable (18,000shares*$4*6/12)
36,000
1-Jul
Dividend payable
36,000
Cash
36,000
22-Aug
Building
165,000
Common shares
165,000
Closing entries:
31-Dec
Income summary
582,000
Retained earnings
582,000
31-Dec
Retained earnings
36,000
Cash dividend
36,000
(b) Open T accounts and post to the shareholders’ equity accounts:
Preference shares
440,000
Beg balance
600,000
6-Feb
1,040,000
Dec 31, ending balance
Common shares
1,050,000
Beg balance
22-Apr
45,000
570,000
6-Apr
165,000
22-Aug
1,740,000
Dec 31, ending balance
Retained earnings
22-Apr
6,000
800,000
Beg balance
31-Dec
36,000
582,000
31-Dec
1,340,000
Dec 31, ending balance
Contributed Capital - Reacquisition of preferred shares
25,000
1-Jan
c)Prepare the statement of changes in equity for the year:
Preference shares
Common shares
Other contributed capital
Retailned earnings
Accumulated other comprehensive income
Number of shares
Capital
Number of shares
Capital
Beg balance
8,000
440,000
70,000
1,050,000
25,000
800,000
10,000
2,325,000
Issued preferred shares
10,000
600,000
600,000
Issued common shares
25,000
735,000
735,000
Reacquired shares
3,000
(45,000)
(6,000)
(51,000)
Dividends
(36,000)
(36,000)
Profit
582,000
582,000
Dec, 31 Balance
18,000
1,040,000
98,000
1,740,000
25,000
1,340,000
10,000
4,155,000
d)Prepare the shareholders’ equity section of the statement of financial position at December 31:
Shareholder's equity:
Share capital
$4 preferred shares, 18,000 shares
1,040,000
Common shares, 92,000shares
1,740,000
Contributed capital - Reacquired
25,000
Total contributed capital
2,805,000
Retained earnings
1,340,000
Accumulated another comprehensive income
10,000
Total shareholder's equity
4,155,000
Date
Account title
Debit
Credit
6-Feb
Cash
600,000
Preference shares
600,000
6-Apr
Cash
570,000
Common shares
570,000
22-April
Common shares (1,050,000/70,000= $15per share*3,000Shares)
45,000
Retained earnings
6,000
Cash
51,000
29-May
Cash dividend
36,000
Dividend payable (18,000shares*$4*6/12)
36,000
1-Jul
Dividend payable
36,000
Cash
36,000
22-Aug
Building
165,000
Common shares
165,000
Closing entries:
31-Dec
Income summary
582,000
Retained earnings
582,000
31-Dec
Retained earnings
36,000
Cash dividend
36,000
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