Question

Shareholders’ equity accounts are affected by a number of transactions and events, and, in many instances, there will be more than one account affected for one transaction or event.

For the following list of transactions and events, indicate from the drop-down menus which shareholders’ equity account(s) will be affected, and how they will be affected (Increased, Decreased, or Not Applicable). If the transaction or event does not affect a shareholders’ equity account, indicate that by selecting "Not Applicable." Where required, space is provided to record more than one account for an event or transaction.

Account(s) Contributed Surplus Accumulated Other Comprehensive Income Stock Dividend Distributable Common Shares Retained Earnings Not Applicable Preferred Shares

Answer 1

S.no	Transaction/ Event	Account(s)	Affect
1	Dividends are declared on $ 4 non cumulative preferred shares.	Retained earnings	Decrease
2	A common stock dividend is distributed	Stock dividend distributable	Increase
		Retained earnings	Decrease
3	Preferred shares are reacquired at a cost that is less than the average per share amount.	Contributed surplus	Increase
		Preferred shares	Decrease
4	There was a loss from discontinued operation.	Contributed surplus	Decrease
5	It was discovered that previous year's cost of goods sold was understated by $ 1,000.	Retained earnings	Decrease
6	Common shares are issued in exchange for Land.	Common shares	Increase
7	A portion of dividends is paid with cash.	Stock dividend distributable	Decrease
8	There was a 2- for- 1 Stock split on common shares	N/A
9	Common shares are reacquired at a cost that is above the average per share amount. There is no balance in the contributed surplus account.	Common shares	Decrease
		Retained earnings	Decrease
10	A manufacturing company had a gain on investment classified as other comprehensive income.	Other comprehensive income	Increase
11	Cash dividends are paid	N/A
12	Preferred shares are issued for cash.	Preferred shares	Increase
13	A 10% common stock dividend is declared.	Stock dividend distributable	Increase
		Retained earnings	Decrease
14	The estimated life of a piece of equipment was changed from 8 years to 12 years.	N/A
15	Common shares are reacquired at a cost that is above the average per share amount. The balance in the contributed surplus account will cover the difference in cost.	Common shares	Decrease
		Contributed surplus	Decrease

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