16.

The following items were shown on the balance sheet of McKean Corporation on December 31, 2011:

Shareholders' Equity

Share Capital

Common shares, no par value, unlimited number of shares

authorized; ______ shares issued.................................................................. $1,200,000

$2 preferred shares, no par value, redeemable at $120, cumulative,

20,000 shares authorized, 6,000 shares issued............................................. 120,000

Total share capital .................................................................................... 1,320,000

Retained Earnings ............................................................................................... 500,000

Total shareholders' equity .............................................................................. $1,820,000

Instructions

Complete the following statements and show your calculations. All of the common shares were issued at $5 per share.

(a)The number of common shares issued was _______________.

(b)The preferred shares dividend was $____________ per share.

(c)It would cost the company $____________ to reacquire 1,000 preferred shares.

(d)The average issue price of the preferred shares was $_____________.

(e)The total amount of cash and other assets paid to McKean Corporation in exchange for share capital, at December 31, 2011 was $______________.

17.

Yaya Blossom's Inc. has a March 31, 2014 fiscal year end and a 35% income tax rate. The following information is available for its 2014 year end:

1. Performed $880,000 service revenue and paid $325,000 in salaries. Interest expense was $12,600.

2. Paid dividends in December 2013 of $14,000 that had been declared in November 2013.

3. On March 10, 2014 declared dividends of $19,000 payable April 30, 2014.

4. Recorded and remitted taxes of $140,000 (related to 2014 fiscal year) during the year.

5. Issued common shares for $15,000 on January 31, 2014.

6. Retained earnings balance on April 1, 2013 is $67,000.

Instructions

a. Prepare an income statement and record the adjustment to income tax.

b. Prepare a statement of retained earnings.

18.

Paco Corporation is authorized to issue an unlimited number of common shares and 1,000,000 shares of preferred shares. During 2017, its first year of operation, the company had profit of $200,000. The following share transactions occurred:

Jan 1Paid the province $5,000 for incorporation fees.

Jan15Issued 500,000 of $1 cumulative preferred shares at $7 per share.

Jan30Lawyers for the company accepted 500 common shares as payment for legal services provided in helping the company incorporate. The legal services are estimated to have a value of $5,000. The shares were actively trading at $10.50 per share.

Jul2Issued 110,000 common shares for land. The land had an asking price of $900,000. The shares are currently selling on a provincial exchange at $8 per share.

Instructions

a)Journalize the transactions for Paco Corporation.

b)Prepare the shareholders' equity section of the balance sheet, Paco has a December 31 yearend.

19.

Sonoma Lakes Ltd. (SLL) has the following authorized share capital:

UnlimitedCommon voting shares

500,000Class A, $5 cumulative preferred shares

500,000Class B, $10 non-cumulative preferred shares

During 2011, SLL had the following share transactions for cash:

Jan. 1Issued 50,000 common shares for $100,000.

Mar. 12Issued 1,000 Class A preferred shares for $60,000.

Apr. 30Issued 20,000 common shares for $2.50 per share.

Jun. 20Issued 3,000 Class B preferred shares for $70 per share.

July 2Reacquired 10,000 common shares for $3 per share.

SLL did not declare any dividends during 2011. On December 31, 2012 a dividend of $3 per share was declared on preferred shares issued.

Instructions

(a)Journalize the share transactions.

(b)Calculate the number of common shares issued at December 31, 2011 and the average cost per common share.

(c)Calculate the amount of the December 31, 2012 total dividend declared and the amount of dividends in arrears after declaring the December 31, 2012 dividend.

20.

Trainor Corporation was organized on January 1, 2014. During its first year, the corporation issued 20,000 preferred shares with a $0.30 dividend entitlement and 200,000 common shares, both at $1 per share. At December 31, the corporation's year end, Trainor declared the following cash dividends:

Preferred sharesCommon Shares

2014$0.25 per share$0.00

2015as required by terms$0.05 per share

2016as required by terms$0.15 per share

Instructions

a.Calculate the total dividends and the amount paid to each class of shares, assuming the preferred dividend is not cumulative.

b.Calculate the total dividends and the amount paid to each class of shares, assuming the preferred dividend is cumulative.

c.Journalize the declaration of the cash dividend at December 31, 2015 using the assumption of part b.

21.

KBR Investments Inc. has issued 40,000 Class A $5-cumulative preferred shares and 25,000 Class B $7-non-cumulative preferred shares. At the end of 2009, there were no dividends in arrears. During 2010, KBR paid dividends of $100,000 to its Class A shareholders. In January of 2011, KBR paid dividends of $120,000 to its Class A shareholders. On December 31, 2011, KBR declared dividends in an amount sufficient to pay out all of the remaining dividends in arrears plus the entire current year obligation including dividends on Class B shares, so that they can pay dividends on common shares.

Instructions

Calculate the dividends declared for Class A and for Class B shareholders on December 31, 2011.

22.

On January 1, 2017, Urban Faith Limited had 200,000 common shares issued at an average cost of $25 per share. During the year, the following transactions occurred:

May1Issued 20,000 common shares for $470,000.

Jun1Declared a cash dividend of $3.50 per share to shareholders of record on June 15.

Jun25Issued 10,000 common shares for $260,000.

Jun30Paid the cash dividend declared on June 1.

Profit for 2017 amounted to $885,000.

Instructions

Prepare journal entries to record the above transactions assuming Urban Faith has a December 31 year end. Be sure to prepare the appropriate closing entries at December 31, 2017.

23.

At December 31, 2010, Cabot Corporation reports revenue of $8,000,000 and expenses of $3,000,000. During the year, the company paid dividends of $400,000. The company had $2,500,000 in retained earnings at the beginning of 2010.

Instructions

(a)Prepare the closing entries for 2010.

(b)Calculate the balance in retained earnings that should be reported on the December 31, 2010 balance sheet.

24.

Ahab Fisheries Inc. has authorized share capital of an unlimited number of common shares and 300,000 $2-cumulative preferred shares.

As of January 1, 2014, 50,000 common shares had been issued at an average cost of $4 each. During 2014, 10,000 common shares were issued on April 1 for cash of $45,000 and on July 1, 20,000 were issued at $4.75 each. On December 15, a cash dividend of $0.50 per share on all common shares was declared, payable to shareholders of record on December 31, and payable on January 20, 2015.

On January 1, 2014, the first preferred shares were issued. $600,000 was received for 80,000 preferred shares. On October 1, the annual dividends on the preferred shares were declared, payable to shareholders of record on October 15, and payable on October 28.

Retained earnings on January 1, 2014 were $336,000 and accumulated other comprehensive income was $57,000. Ahab had profit of $323,000 in 2014, and other comprehensive income items totalling $37,500. All dividends were paid on their due dates. On December 31, 2014, Ahab's common shares were trading at $76.50.

Instructions

a.Calculate the profit available to common shareholders.

b.Calculate the weighted average number of common shares in 2014.

c.Calculate the earnings per share.

25.

Holiday Travel Corporation's shareholders' equity section at December 31, 2016 appears below:

Shareholders' equity

Common shares, no par value, 50,000 shares issued................................ $600,000

Retained earnings........................................................................................ 150,000

Total shareholders' equity.................................................................................... $750,000

On June 30, 2017, the board of directors of Holiday Travel Corporation declared a 10% stock dividend, payable on July 31, 2017, to shareholders of record on July 15, 2017. The fair market value of Holiday Travel Corporation's shares on June 30, 2017, was $12 per share.

On December 1, 2017, the board of directors declared a 2-for-1 stock split effective December 15, 2017. Holiday Travel Corporation's shares were selling for $16 on December 1, 2017, before the stock split was declared. Profit for 2017 was $225,000 and there were no cash dividends declared.

Instructions

a)Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split.

b)Fill in the amount that would appear in the shareholders' equity section for Holiday Travel Corporation at December 31, 2017, for the following items:

1.Common shares$____________

2.Number of shares issued$____________

3.Retained earnings$____________

4.Total shareholders' equity$____________

26.

On January 1, 2017, Chu Corporation had retained earnings of $422,000. During the year, Chu had the following selected transactions:

1.Declared cash dividends of $100,000.

2.Suffered a loss of $70,000.

3.Corrected understatement of 2016 profit because of an inventory error $45,000. The company has a 30% income tax rate.

Instructions

Prepare a statement of retained earnings for the year.

27.

On January 1, 2017, Only You Merchandise Ltd. has 5,000 common shares issued for a total of $7,500, and no other shares or contributed capital. During 2017, Only You had the following transactions:

Jan 15 Issued 1,500 common shares for $1.50 each.

Mar 31 Settled an account for legal expenses by issuing 3,000 shares. The value of the legal services was $5,000.

Jun 30 Reacquired 1,700 shares for $2.00 each.

Sep 30 Issued 10,000 shares in exchange for equipment with a fair value of $22,500.

Instructions

a) Record the transactions.

b) Calculate the number and average price of common shares issued at the end of 2017.