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Secord limited has two classes of shares outstanding preferred (6$ dividends) and common. At December 31,...

Secord limited has two classes of shares outstanding preferred (6$ dividends) and common. At December 31, 2016, the following accounts and balances were included in shareholders equity.

Preferred shares, 300,000 shares issued (authorized 1,000,000 shares)                 300,000

common shares 25,000,000   

contributed surplus-preffered 200,000

contributed surplus-common. 2,000,000

retained earnings 5,500,000

accumulated other comprehensive income 250,000

The contributive accounts arise from net excess of proceeds over cost on previous cancellation of shares of each respective class. The following transactions affected shareholders equity during 2017:

Jan 1

Issues 25,000 common shares at 25$ per share

Feb 1

Issues 50,000 common shares at 20$ per share

June 1

Declared a 2 for 1 stock split (common shares)

July 1

Purchase and retired 30,000 common shares at 15$ per share. Round average cost of share to the nearest cent

Dec 31

Net income of 2.1 million comprehensive income is 2,050,000

Dec 31

The preferred dividend is declared and a common dividend of 0.50 per share is declared

Instruction

a) prepare a statement of changes in equity and shareholder equity section of the financial statement for December 31 2017. Show calculations with T accounts

b)prepare journal entry for repurchase of 30,000 common shares on July 1 2017

c)prepare journal entry for repurchase of 30,000 common shares assuming with repurchase taking place may 31 at 15$ per share. What effect will the change of date  have on  total shareholders equity?

business   accounting   
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Answer #1

Journal entries: Date Account Titles Debit Credit Jan 1 Cash ( S 22 x 30,000) 660,000 Preferred Stock ($ 20 x 30,000) 600,000 Paid-in capital in excess of par Preferred Stock 60,000 Feb1 Cash $ 20 x 100,000) 2.000,000 Common Stock ($5 x 100,000) 500,000 Paid-in capital in excess of par- Common Stock 1,500,000 June Retained eamings 2,625,000 Paid-in capital in excess of par- Common stock 2,100,000 Common stock dividend distributable S5 x(2,000,000 +100,000) x 0.05 525,000 June Common stock dividend distributable 20 525,000 Common stock 525,000 July 1 Treasury Stock 300,000 Cash 300,000 Sept Cash 15 110,000 Treasury stock 100,000 Additional paid-in capital- Treasury stock 10,000 Dec Retained Earnings 31 1,380,500 Dividends payable - Common Stock ( 1,092,500 2,100,000 x 1.05)-30,000 10,0001 x$ 0.50 Dividends payable-Preferred Stock( 150,000 + 30,000) x $ 20 x 8% 288,000 Dec Income Summary 31 2,100,000 Retained Earnings 2,100,000 2 Stockholders Equity section of Balance Sheet as at December 31, 2018 Preferred Stock, 1,000,000 shares authorized, 3,600,000 180,000 shares outstanding Common Stock, 5,000,000 shares authorized, 11,025,000 2,205,000 shares issued Paid-in capital in excess of par Common Stock30,600,000 Paid-in Capital in excess of par- Preferred Stock260,000 Additional paid-in capital Treasury stock Retained Earnings Treasury Stock Stockholders Equity 10,000 30,870,000 2,594,500 (200,000) 47,889,500

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