On January 1, 2014, Schipper Ltd. had the following shareholders' equity accounts: Common shares (1,000,000 issued)..............$1,500,000 Retained

Question:

On January 1, 2014, Schipper Ltd. had the following shareholders' equity accounts:

Common shares (1,000,000 issued)..............$1,500,000

Retained earnings....................................1,800,000

The company was also authorized to issue an unlimited number of $4 noncumulative preferred shares. As at January 1, 2014, none had been issued. During 2014, the corporation had the following transactions and events related to its shareholders' equity:

Jan. 2 Issued 100,000 preferred shares for $50 per share.

Apr. 1 Paid quarterly dividend to preferred shareholders.

July 1 Paid quarterly dividend to preferred shareholders.

Aug. 12 Issued 100,000 common shares for $1.70 per share.

Oct. 1 Paid quarterly dividend to preferred shareholders and a $0.25 per share dividend to the common shareholders.

Dec. 31 Loss for the year was $100,000.

Instructions

(a) Journalize the transactions and the entries to close dividends and the Income Summary account.

(b) Open general ledger accounts for the shareholders' equity accounts and post entries from (a).

(c) Prepare the shareholders' equity section of the balance sheet at December 31, 2014, including any required disclosures. Assume Schipper is reporting under ASPE.

Taking It Further

Schipper incurred a loss in 2014. Are companies allowed to declare and pay dividends during a year when they have a loss?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...