Carlsbad & Sons Inc. produces custom garden furniture. On March 1, 2015, it had the following capital account balances:
Retained earnings .............................................................................$456,000
Common shares, unlimited authorized, 20,000 issued and outstanding ............... 100,000
$2.50 preferred shares, 100,000 authorized, 2,000 issued and outstanding ........... 50,000
Carlsbad & Sons uses dividend accounts to record all dividends, and its income tax rate is 25%. Below are selected transactions during the year ended February 29, 2016:
Mar. 31. Carlsbad & Sons repurchased and retired 5,000 common shares at $4.00 per share.
Aug. 31. Issued 25,000 common shares for equipment valued at $160,000. On this day, the common shares were trading at $6.50 per share.
Oct. 15. The board of directors declared a 2:1 share split.
Dec. 1. The board of directors declared annual dividends of $8,000 to be paid January 15, 2016, to shareholders of record on December 20.
Jan. 15. Paid the cash dividend.
Feb. 29. Closed the accounts on February 29, 2016. Net income was $230,000.
Instructions
1. Journalize the transactions.
2. Calculate earnings per share.
3. Prepare a Statement of Changes in Equity for 2016.
4. Prepare the shareholders' equity section of the statement of financial position as at February 29, 2016.