CORPORATE TRANSACTIONS AMG Inc. had the following balances in its shareholders\'
ID: 2415901 • Letter: C
Question
CORPORATE TRANSACTIONS
AMG Inc. had the following balances in its shareholders' equity at the beginning of the current year:
Common shares (no par value, 9,000 shares, unlimited authorized) $ 180,000
Retained earnings 92,000
Total shareholders' equity $272,000
During the year the following transactions took place:
• Purchased and cancelled 1,000 shares of own stock at $17 per share
• Issued 7,000 shares at $20 per share
• Declared a 10% stock dividend, market price $21 per share
• Paid the stock dividend
• Declared a 4 to 1 stock split
Required:
a. Prepare the journal entries to record the transactions.
b. Determine the number of shares outstanding.
c. Prepare the Shareholder’s Equity section of the Statement of Financial Position. Year end is December 31st.
Explanation / Answer
a) Equity share Capital A/c 17000
To Cash 17000
Equity share Capital A/c 17000
To Equity share Capital A/c 17000
b) Bank A/c Dr 140000
To Equity share Capital A/c 140000
c) For declariaton there is no entry
D) Dividend A/c 31500
To Cash A/c 31500
e) Stock Split no entry
2) Number of shares = (9000-1000+7000)/4 = 3750 shares
3) Shareholder’s Equity section of the Statement of Financial Position :
Equity Share capital 180000
Less : Cancelled 17000
Add : Issued 140000
Total 303000
Add : Retained earnings 92000-31500 61500
Total 364500