Marline is a public company whose shares are traded in the over-the-counter (OTC
ID: 2467480 • Letter: M
Question
Marline is a public company whose shares are traded in the over-the-counter (OTC) market At December 31.2012. M*t had 6 million author i ml sham of S5 par value common slock, 2 million shares of Which were issued and outstanding. The equity accounts at December 31.2012. had the following balance Transactions during 2013 and other information relating to Mart's equity accounts Mere as follows On January $. 2013. Mart issued 100.000 shares of S50 par value, 9% cumulative, convertible preferred slock at S54 per share Each share of preferred stock ts convertible, at the option of the shareholder, mto two (2) shares of common stock Mart had 250.000 authorized shares of preferred stock The preferred stock has a liquidation value of 155 per share On February 1. 2013. Mart reacquired 20,000 shares of its common stock for S16 per share Mart uses the cost method to account for treasury stock On March 15.2013. Mart paid $200,000 for 10.000 shares of common stock of Lew . Inc . a public companv whose stock ts traded on the national stock exchange This stock was I % of the outstanding common stock of Lew It was acquired for long-term investment purposes and had a lair value of SI 5 per share on December 31.2013 This decline in lair value was not considered permanent On April 30.2013. Mart had completed an additional public offering of 500.000 shares of its 15 par value common stock The stock was sold to the public at 112 per share On June 17.2013. Mart declared a cash dividend of II per share of common stock, payable on July 10.2013. to shareholders of record on July 1.2013 On November 6. 2013. Mart sold 10.000 shares of treasury stock for 121 per share On December 7. 2013. Mart declared the annual cash div idend on preferred stock, pay able on January 7.2014. to shareholders of record on December 31. 2013 On January 17.2014. before the books were closed for 2013, Mart became aware that the ending inventory balance at December 31.2012. was overstated by 1200.000 The tax rate applicable to the 2012 net income was 30% The appropriate correcting entry was recorded on that day After correction of the beginning inventory. net income for 2013 was 12.250.000Explanation / Answer
Statement of Shareholder's Equity Particulars Amount Authorized Cumulative convertible Prefrence Shares : 250000 @ $50 12500000 Authorized Common Stock : 6 Million @ $5 30000000 Common stock : issued 2500,000 outstanding : 2490,000 12500000 9% Cumulative, Convertible preference shares 5000000 Additional Paid in capital Common Stock' 11050000 Additional Share capital - Preference Shares 400000 Retained Earnings 2570000 Total 31520000 Less : Treasury Stock -160000 Net share holder's Equity 31360000 Working' Statement of changes Date Particulars Common Stock Additional Share capital Retained earnings Prefrence shares Additional Share capital - Preference Shares Treasury Stock 01.01.2013 Opening 10000000 7500000 3250000 05.01.2013 100,000 9% Cumulative, Convertible preference shares 5000000 400000 01.02.2013 Purchase 20,000 @ $16 -320000 15.03.2013 No entry for this as it is investment 30.04.2013 issued 500,000 @ $12 2500000 3500000 17.06.2013 Cash dividend for shareholders till 01.07.2013 ( 2,000,000 + 500,000 - 20000) -2480000 06.11.2013 Sold 10,000 treasury stock @ $ 21 50000 160000 07.12.2013 Cash dividend on preference share holders -450000 31.12.2013 No entry for this as corrected in next entry 31.12.2013 Profit 2250000 Total 12500000 11050000 2570000 5000000 400000 -160000