Question

Question 4 (20 Marks) 1 Mark Inc. has authorized share capital of an unlimited number of common shares and 800,000 preferred, $2 preferred shares. At January 1, 2019, the balance in its shareholders equity includes $60,000 in common shares representing 20,000 shares and $45,000 in preferred shares representing 1,500 shares and retained earnings of $110,000. Profit for the year ending December 31, 2019 was $20,000. No dividends were declared during 2019. During 2019, Mark Inc. had the following share transactions: Mar Issued 3,000 common shares for $5 each. Jun 30 Issued 600 preferred shares for $12 each. Sep Issued 50,000 common shares in exchange for land valued at $250,000. Required: a) Journalize the share transactions. (8 marks) b) Prepare the equity section of Mark Inc. balance sheet at December 31, 2017 and describe any additional disclosure required related to share capital. (12 marks) 1

Answer 1

a.)	Date	Particulars	Debit $	Credit $
	Mar.1, 2019	Cash ( 3,000 x 5 )	15,000
		Common Shares		15,000
		(Being 3,000 Common shares issued for cash)
	June.30,2019	Cash ( 600 x 12 )	7,200
		Preferred Shares		7,200
		(Being 600 preferred Shares issued for cash)
	Sep.1,2019	Land	250,000
		Common Shares		250,000
		(Being 50,000 Common Shares issued in exchange of land)

Note: In absence of par value of common & preferred stock, it is assumed that they are with No Par value.

b.)	Equity section of Mark Inc. at December 31,2017
		Amount in $
	Common Shares ( Authorized unlimited & Issued 73,000 )	325,000
	( 60,000 + 15,000 + 250,000 )
	Preferred Shares ( Authorized 800,000 & Issued 2,100 )	52,200
	( 45,000 + 7,200 )
	Retained Earnings ( 110,000 + 20,000 )	130,000
	Ending Balance of Shareholder's equity	507,200
	The disclosures about capital stock and additional paid-in capital help the users analyse different classes of stockholders, their differentiating rights, dividend payments, etc.