Question

PART THREE: At the end of December 31, 2022, the shareholder's equity was as follows for ABZ Inc.: $755,000 $2 Preferred Shares (37,500 shares issued and outstanding; cumulative, nonparticipating, and convertible into two common shares for each preferred share Common Shares (100,000 shares issued and outstanding) Retained Earnings AOCI: OCI unrealized gains from investments Total Shareholders' Equity 500,000 1,500,000 80,000 $2,835,000 Earnings for 2021 had been $725,000 which includes the comprehensive income of $120,500 from an unrealized gain on an investment of $425,500. Basic earnings per share was $1.25:

Answer 1

As per policy, only first question solution is to be provided at a time. so, solved first two instead.

1. conversion of preferred share into common shares :

Two common share for each preferred share. Hence, 2,500 preferred shares = 5,000 common shares.

split 3-for-1 means for each 1 share now the holder will have 3 shares means will receive 2 more shares.

so, after split (3-for-1) number of common shares will receive = 5000*2 common shares = 10,000 common shares.

in total the holder of 2,500 preferred shares will receive 5,000+10,000 common shares = 15,000 common shares.

2. 2023

July 15 Treasury stock (dr.) $67,500

Cash (cr.) $67,500

(7,500 common shares repurchased @ $9 per share)

July 15 Common Stock $37,500

Retained Earnings $30,000

Treasury stock $67,500

(retirement if treasure stock at value more than par value)