Question

Question 4:                                                                                                                                          6 Marks

Complete the Equity section of the Balance Sheet for Moonlite Corporation shown below.

Moonlite Corporation Equity Section of the Balance Sheet As of December 31, 2014
Contributed Capital:		Amount
Preferred shares, $ 1.50 cumulative, unlimited shares authorized, 9,000 shares issued and outstanding	A
Preferred shares $ 2.00 non-cumulative, unlimited shares authorized, 12,000 shares issued and outstanding.	B
Common shares, unlimited shares authorized, ______ shares issued and outstanding	C	212,800
Total Contributed Capital	D
Retained Earnings	E
Total Equity	F

1. Calculate amount “A” assuming an average issue price of $ 12.00 per share

2. Calculate amount “B” assuming an average issue price of $ 25.00 per share.

3. Calculate the number of Common shares issued and outstanding assuming an average issue price of $ 5.60 per share.

4. Calculate amount “D”

5. Calculate amount “E” assuming the following:

1. Net income after taxes for the first three years of operations at Moonlite Corporation amounted to $ 65,000 in 2012, $ 142,000 in 2013, and $ 159,000 in 2014.
2. Dividends totaling $ 80,000 were declared and paid in 2014. No other dividends were declared over the three year period.

6. Calculate amount “F”

Worksheet if Required

Answer 1

Contributed Capital:		Amount
Preferred shares, $ 1.50 cumulative, unlimited shares authorized, 9,000 shares issued and outstanding	A	$      108,000.00	[=9000 shares*$12/share]
Preferred shares $ 2.00 non-cumulative, unlimited shares authorized, 12,000 shares issued and outstanding.	B	$      300,000.00	[=12000 shares*$25/share]
Common shares, unlimited shares authorized, 38000 shares issued and outstanding	C	$      212,800.00
[212800/5.6 = 38000 share]
Total Contributed Capital	D	$      620,800.00	[108000+300000+212800]
Retained Earning (Note)	E	$      221,500.00
Total Equity	F	$ 1,463,100.00	[620800+1463100]
Retained Earning:
Net income after taxes for 2012		$        65,000.00
Net income after taxes for 2013		$      142,000.00
Net income after taxes for 2014		$      159,000.00
Less: Dividends paid in 2014 (assumed paid on common shares)		$      (80,000.00)
Less: Dividends on cumulative prefernce shares for 3 years		$      (40,500.00)	[=$1.5 per share*9000*3 years]
Less: Dividends on non cumulative prefernce shares for 1 year		$      (24,000.00)	[=$2 per share*12000]
		$      221,500.00