Question

AIM Inc. showed the following equity account balances on the December 31, 2019, balance sheet:
 

Common shares, unlimited authorized shares, 820,000 shares issued and outstanding	$	6,478,000
Retained earnings		2,123,600

During 2020, the following selected transactions occurred:
 

Feb.	10		Repurchased and retired 159,000 common shares at $10.00 per share; this is the first retirement recorded by AIM.
May	15		Declared a 2:1 share split to shareholders of record on June 1, distributable June 15.
Dec.	1		Declared a 10% share dividend to shareholders of record on December 10, distributable December 20. The market prices of the shares on December 1, December 10, and December 20 were $6.00 $7.10, and $5.50, respectively.
	20		Distributed the share dividend declared December 1.
	31		Closed the credit balance of $801,839 in the Income Summary account.

Required:
a. Journalize the transactions above (assuming the retirements were the first ever recorded by AIM Inc.). The company does not use a share dividends account. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

a)

Date	General journal	Debit	Credit
Feb.10,2020	Common shares	1,307,670
	Retained earnings	129,330
	To cash		1,437,000
May 12,2020	No entry required
Dec.1,2020	Retained earnings	981,000
	To common share dividend distributable		981,000
Dec.20, 2020	Common share dividend distributable	981,000
	To common shares		981,000
Dec.31, 2020	Income summary	985,930
	To retained earnings		985,930

Working notes:

1) feb.10-common shares=8746920/961200=9.1

9.1*143700=$ 1,307,670

retained earnings=10-9.1=0.9

  0.9*143700=$ 129,330

2)Dec.1 retained earning amount

961,200-143700=817,500

817,500*2(share split in 2:1 ratio) =1,635,000

1,635,000*10%=163,500

so 163,500*6=981,000

Date	Note disclosure	Amount
Feb.10, 2020	Note disclosure not required	0
May 15,2020	Note disclosure required	817,500
Dec.1, 2020	Note disclosure not required	0
Dec.20, 2020	Note disclosure not required	0
Dec.31, 2020	Note disclosure not required	0

(may 15,2020   961,200-143,700=817,500)

b)

Equity section of balance sheet on 31 dec.2020

Particulars	Amount
Contributed capital
Common shares(8,746,920-1,307,670+490,500)	$ 7,929,750
Retained earnings(2,365,400-129,330-981,000+985,930)	$2,241,000
Total equity	$10,170,750