Acct 211 W2017 Midterm Question 2 Shareholders\' Equity (12 marks 24 minutes) On
ID: 2540616 • Letter: A
Question
Acct 211 W2017 Midterm Question 2 Shareholders' Equity (12 marks 24 minutes) On January 1, 2017, Renewable Corporation had the following Shareholders' Equity accounts: Contributed Capital: Preferred shares, no par value, $.25 dividend cumulative, convertible into 100,000 common shares, callable at any time after issue, unlimited shares authorized 100,000 issued and outstanding Common shares, no par value, unlimited shares authorized, 32,000 issued and outstanding Contributed Surplus- redemption of preferred shares $260,000 175,000 16,000 451,000 3,200,000 $3,651,000 Total contributed capital Retained Earnings Total Shareholders' Equity Prepare Journal entries for each of the following entries (4 marks): 1. On January 15, 2017 Renewable Corporation issued a common stock dividend of 10% based on the initial recorded common share balances. Using a market value of $5.5 per share, assume that 3,000 whole shares were issued along with 200 fractional rights (valued at equivalent whole shares) 2. On January 18, 2017 Renewable Corporation shareholders chose to convert 14,000 shares into common shares on a time is $2.5 and of common is $5.5 3. On December 1, 2017 Renewable Corporation declared $120,000 in dividends. Dividends are recorded in separate liability accounts for each class of shareholder. There are two years of dividends in arrears. DATE NExplanation / Answer
Date
Particulars
Debit ($)
Credit ($)
15.01.2017
Retained earnings
17600
Dividend equity
17600
(Being equity dividend issued)
(3000+200) X 5.5
Dividend equity
17600
Common stock
17600
(Being the common stock from dividend issued)
18.01.2017
Preferred share capital
36400
Retained earnings
40600
14000 x (5.5-2.6)
Common stock
77000
(Being preferred stock converted into common stock)
01.12.2017
Accumulated profit / retained earnings
120000
Preferred dividend
71500
Common dividend
48500
(Being common and preferred dividend issued)
Preferred dividend
71500
Common dividend
48500
Bank
120000
(Being common and preferred dividend paid)
Workings:
Dividend outstanding
Preferred shares
100000
Dividend
0.25 per share
Preferred dividend
25000
Number of years
2
Dividend outstanding
50000
Current dividend
Preferred stock
100000
Less: Number of share converted
14000
86000
Divined for 2017
21500
Total preferred dividend
71500
thus, common dividend
Total dividend
120000
Less: Total preferred dividend
71500
48500
Preferred shares
86000 shares @2.6 per share
223600
Common shares
49200 shares (Note 1)
269600
Contributed surplus
16000
Total contributed capital
509200
Retained earnings
3200000
Add: Net income
787000
3987000
Less; Dividend
120000
3867000
Total shareholders' equity
4376200
Note 1
Opening common shares
32000 shares
175000
Issued as equity dividend
3200 shares
17600
Conversion of preferred shares
14000 shares
77000
Common shares
269600
Date
Particulars
Debit ($)
Credit ($)
15.01.2017
Retained earnings
17600
Dividend equity
17600
(Being equity dividend issued)
(3000+200) X 5.5
Dividend equity
17600
Common stock
17600
(Being the common stock from dividend issued)
18.01.2017
Preferred share capital
36400
Retained earnings
40600
14000 x (5.5-2.6)
Common stock
77000
(Being preferred stock converted into common stock)
01.12.2017
Accumulated profit / retained earnings
120000
Preferred dividend
71500
Common dividend
48500
(Being common and preferred dividend issued)
Preferred dividend
71500
Common dividend
48500
Bank
120000
(Being common and preferred dividend paid)