Question

Pharma Shop Ltd. is a mid-sized public company that had been in operation for many years. On December 31, 2019, it had an unlimited number of common shares authorized and 6,700,000 shares issued at an average value of $25 per share. As well, there were 6,500,000 preferred shares authorized, with 325,000 of them issued at $15 per share. The balance in retained earnings was $26,650,000. The balance in accumulated other comprehensive income was $520,000. The preferred shares pay an annual dividend of $2 per share. During 2020, the following transactions affected shareholders' equity: 1. 2. 3. 4. 5. 6. In total, 170,000 new common shares were issued at $30 per share. The preferred dividend for the year was declared and paid. A 10% common stock dividend was declared when the market price was $33 per share. The shares were distributed one month after the declaration. In early December 2020, a dividend of $1.60 per share was declared on the common shares. The date of record was December 15, 2020. The dividend will be paid the following year. The company earned a net income of $14,860,000 and had an other comprehensive loss of $155,000. On December 31, 2020, the company declared a two-for-one stock split on common shares. (a) Use a spreadsheet or table format like the one in the first practice problem to track all of the changes in the shareholders' equity accounts in 2020. (If an amount reduces the account balance then enter with negative sign, e.g. -15,000 or in parenthesis, e.g. (15,000).) Number of common shares Number of preferred Shares Preferred shares Date Accumulated other comprehensive income Retained Earnings Common Shares Total Dec. 31, 2019 1. issued common shares 2. preferred share dividends 3. 10% stock dividend on common shares 4. common share dividend 5a. net income for year 5b. other comprehensive (loss) for year 6. two-for-one stock split on common shares Dec. 31, 2020

Answer 1

	No.of	Common shares	Number of	Preferred Shares	Retained Earnings	Accumulated other	Total
Date	Common shares		Preferred shares			Comprehensive Income
Dec 31,2019	6700000	$        167,500,000	325,000	$            4,875,000	$            26,650,000	$                              520,000	$      199,545,000
Issued Common shares	170000	$             5,100,000					$          5,100,000
Preference Share dividend					$                (650,000)		$            (650,000)
10% stock dividend on common shares					$          (22,110,000)		$      (22,110,000)
Common share dividend
Net Income for year						$                        14,860,000	$        14,860,000
Other Comprehensive (loss) for year						$                           (155,000)	$            (155,000)
Two for one stock split on common shares	13740000	$        172,600,000
Dec 31,2020	13740000	$        172,600,000	325000	$            4,875,000	$              3,890,000	$                        15,225,000	$      196,590,000