Question

Swifty Corp. reported the following amounts in the shareholders' equity section of its December 31, 2019 SFP: Preferred shares, $7 dividend (12,000 shares authorized, 2,400 shares issued) Common shares (unlimited authorized, 29,000 issued) Contributed surplus Retained earnings Accumulated other comprehensive income Total $242,400 696,000 47,100 300,000 66,000 $1,351,500 During 2020, the company had the following transactions that affect shareholders' equity. LI, 2019 1. Paid the annual 2019 $7 per share dividend on preferred shares and a $3 per share dividend on common shares. These dividends had been declared on December 31, 2 2. Purchased 3,500 shares of its own outstanding common shares for $30 per share and cancelled them. 3. Issued 1,000 shares of preferred shares at $102 per share (at the beginning of the year). 4. Declared a 15% stock dividend on the outstanding common shares at their fair value when the shares were selling for $44 per share. 5. Issued the stock dividend. 6. Declared the annual 2020 $7 per share dividend on preferred shares and a $2 per share dividend on common shares. These dividends are payable in 2021. The contributed surplus arose from net excess of proceeds over cost on a previous cancellation of common shares. Total assets at December 31, 2019, were $2,140,000, and total assets at December 31, 2020 were $2,616,000. The company follows IFRS.

a) Prepare journal entries to record the transactions above.

Answer 1

Transaction	Account	Debit	Credit
1	Dividend payable to Common shares (29000*3)	87,000
	Dividend payable to preferred shares (2400*7)	16,800
	Cash		103,800
	(Dividend payment of $3 on common stock and $7 on preferred stock)
2	Treasury Stock	105,000
	Cash		105,000
	(Purchase of 3500 treasury stock @ 30 per share)
2	Common Stock (3500*24)	84,000
	Additional Paid in Capital(105000-84000)	21,000
	Treasury Stock		105,000
	(Cancellation of 3500 treasury stock)
3	Cash	102,000
	Preference Share capital		100,000
	Contributed Surplus		2,000
	(Issue of 100 Shares having face value of 100 per shares issued at 102)
4	Retained Earning (29000*15%*44)	191,400
	Stock Dividend Payable		191,400
	(Issue of 15% stock dividend, 4350 common shares)
5	Stock Dividend Payable	191,400
	Common Stock (29000*15%*24)		104,400
	Additional Paid in Capital (29000*15%*(44-24)		87,000
	(Payment of stock Dividend)
6	Retained Earning	90,500
	Dividend payable to Common shares ((29000+4350)*2		66,700
	Dividend payable to preferred shares ((2400+1000)*7)		23,800
	(Dividend declared $2 per share on common shares & $7 per share on preferred share)

Note :

Transaction -1 : The dividend declared last year and payment is only to be made during the year and hence entry will be payment of dividend from dividend payable