Fenwick Ltd. began operations in 2016. Its fiscal year-end is December 31. Components of the condensed balance sheet as at December 31, 2018, are as follows:

During 2019, Fenwick had the following activities:

i. January 1: Issued 40,000 preferred shares with cumulative dividends of $1.25 per share. Proceeds were $480,000, or $12 per share.
ii. July 1: Repurchased and cancelled 50,000 common shares at a cost of $18 per share.
iii. Net income for the year was $1,700,000.

During 2020, the company had the following activities:

i. July 1: Repurchased and cancelled 60,000 common shares at a cost of $30 each.
ii. December 31: Fenwick declared dividends totalling $400,000.
iii. Net income for the year was $800,000.

Required:
a. Assume that Fenwick follows the guidance in ASPE pertaining to accounting for equity transactions. Prepare the journal entries required for 2019.
b. Prepare the equity section of the balance sheet as at December 31, 2019, including any notes that would be required.
c. Prepare the journal entries required for 2020.
d. Prepare the equity section of the balance sheet as at December 31, 2020, including any notes that would be required.

Transcribed Image Text:

Current liabilities Bonds payable-7%, mature 2022 Total liabilities Common shares-500,000 authorized, 300,000 issued and outstanding Contributed surplus common shares, from share repurchases and resales Retained earnings (deficit) Total shareholders' equity $ 400,000 8,000,000 $8,400,000 $6,000,000 400,000 (200,000) $6,200,000