Question

The balance sheet for Umi Sustainable Seafood Inc. reported the following components of equity on December 31, 2019:
 

Common shares, unlimited shares authorized, 20,100 shares issued and outstanding	$	369,000
Retained earnings		217,000
Total equity	$	586,000

In 2020, Umi had the following transactions affecting shareholders and the equity accounts:
 

Jan.	5		The directors declared a $3.30 per share cash dividend payable on Feb. 28 to the Feb. 5 shareholders of record.
Feb.	28		Paid the dividend declared on January 5.
July	6		Sold 800 common shares at $38.50 per share.
Aug.	22		Sold 1,300 common shares at $27.30 per share.
Sept.	5		The directors declared a $3.30 per share cash dividend payable on October 28 to the October 5 shareholders of record.
Oct.	28		Paid the dividend declared on September 5.
Dec.	31		Closed the $347,300 credit balance in the Income Summary account.
	31		Closed the Cash Dividends account.

Required:
1. Prepare journal entries to record the transactions and closings for 2020. The company uses a Cash Dividends account when dividends are declared.

Answer 1

Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
05-Jan	Dividend (20300*3.50)		71050
	Dividend payable				71050
	(for dividend declared)
28-Feb	Dividend payable			71050
	Cash					71050
	(for dividend paid)
06-Jul	Cash				34830
	Common stock capital (900*38.70)		34830
	(for issuance of stock)
22-Aug	Cash				38500
	Common Stock capital (1400*27.50)		38500
	(for issuance of stock)
05-Sep	Dividend (22600*3.5)		79100
	Dividend payable				79100
	(for dividend paid)
28-Oct	Dividend payable			79100
	Cash					79100
	(for dividend paid)
31-Dec	Income summary			347500
	Retained earnings				347500
	(for closing the income summary)
31-Dec	Retained earnings			150150
	Dividend (71050+79100)			150150
	(for closing the dividend)
Statement of changes in Equity
			Commn St	Ret. Earn.	Total Eq.
Balance on Jan01		371000	219000	590000
Issuance of stock		73330		73330
Net Income			347500	347500
Dividend declared			-150150	-150150
Ending balance of Dec31	444330	416350	860680
Equity Section:
Contributed capital
Common stock capital	444330
Retained earnings		416350
Total equity		860680