Question

* Question 2 Greencastle Corporation, a publicly traded company, was organized on January 1, 2018. It is authorized to issue an unlimited number of $3 noncumulative preferred shares and an unlimited number of common shares. The following share transactions were completed during the company's first year of operations: Jan. 10 Issued 940,000 common shares for $2 per share. Mar. 1 Issued 18,000 preferred shares for $50 per share. May 1 Issued 235,000 common shares for $3 per share. June 1 Reacquired and retired 9,000 common shares at $2 per share. Determine the average cost of each reacquired share to the nearest cent before recording this transaction. July 24 Issued 30,600 common shares for $117,000 cash and used equipment. The equipment originally cost $31,000. It now has a carrying amount of $15,500 and a current value of $16,400. The common shares were trading for $4 per share on this date. Sept. 4 Issued 11,000 common shares for $5 per share. Nov. 1 Issued 4,100 preferred shares for $50 per share. 20 Reacquired and retired 16,000 common shares at $4 per share. Determine the average cost of each reacquired share to the nearest cent before recording this transaction. Dec. 14 Declared a $76,000 cash dividend to the preferred shareholders, to shareholders of record on December 31, payable on January 10. 31 Reported net income of $1,250,000 for the year.

Answer 1

Record the transaction as follows: Account Titles and Explanations Date Debit Credit Jan. 10 Cash $1,880,000 Common shares (940000x $2) $1,880,000 Mar. 1Cash $900,000 Preferred shares (18000x $50) $900,000 May. 1 Cash $705,000 Common shares (235000x $3) $705,000 Jun. 1 Common shares (9000x$2.2)* Cash (9000x$2) Contributed surplus $19,800 $18,000 S1,800 Jul 24 Cash Equipment Common shares (30600x$4) $117,000 $5,400 $122,400 Sep. 4 Cash $55,000 Common shares $55,000 Nov, 1 Cash $205,000 Preferred shares $205,000

Nov. 20 Common shares (16000x $2.43) Contributed surplus Retained earnings Cash (16000x $4) $38,880 $1,800 $23,320 $64,000 Dec. 14 Dividends declared Dividend payable $76,000 $76,000 Workings: (*) June 1 (S1880000+S705000) Calculate cost of reacquired shares = (940000 235000) $2585000 1175000 - S2.2

Cost Date Number of common shares Jan. 10 May. 1 Jun. 1 940000 $1,880,000 $900,000 235000 (9000) ($19,800) $122,400 $55,000 $2.937.600 Jul. 24 Sept. 4 30600 11000 1207600 Average Cost/No. of common shares $2.43 cost Journalize closing entries as follows: Account Titles and Explanations Date Debit Credit Dec. 31 Retained earnings $76,000 $76,000 Dividends declared Dec. 31 Income summary Retained earnings S1,250,000 $1,250,000 Prepare T-accounts as follows:

Preferred shares Mar. 1 Nov. 1 Dec. 31 (bal.) $1,105,000 $900,000 $205,000 Common shares $19,800 Jan. 10 $38,880 May. 1 Jul. 24 Jun. 1 S1,880,000 Nov. 20 $705,000 $122,400 Sep. 4 Dec. 31 (bal.) $2,703,720 $55,000 Contributed surplus $1,800 Jun. 1 Nov. 20 $1,800 Dividend Declared $76,000 Dec. 31 Dec. 14 $76,000 Dec. 31 (bal.) Retained Earnings $23,320 Dec. 31 $76,000 Nov. 20 Dec. 31 $1,250,000 Dec. 31 (bal.) si,150,680

Prepare the shareholders' equity section of financial position at December 31 as follows: Greencastle Corporation Statement of Financial Position (partial) December 31, 2018 Shareholder' equity Share capital Preferred shares $1,105,000 S2,703,720 $3,808,720 S1,150,680 $4,959,400 Common shares Total share capital Retained earnings Total shareholder's equity