333 334 PART III 335 336 337 338 339 340 Razul took the proceeds from dissolving the partnership and purchased a corporation selling electrical parts used for large production companies. He employs several people, but is looking to expand his operations further. In addition to expanding the sales of electrical parts, he also wants to start selling heating, ventilation and air conditioning (HVAC) parts and machinery through a separate division of the company called 'HVAC Parts & Machinery. Currently, Razul owns all the shares in the corporation. To raise the needed cash, he decides to offer common and preferred shares for sale to investors starting in 2021. Below is the balance sheet at the end of 2020. 341 342 343 344 345 Assets 346 Cash $24,660 Holister Electric Inc. Balance Sheet As at December 31, 2020 Liabilities Accounts Payable 347 Accounts Receivable 16,700 Unearned Revenue 348 Prepaid Insurance 7,200 Bank Loan 349 Inventory 81,400 Total Liabilities $15,400 10,000 25.000 50,400 350 Property, Plant & Equipment 215,000 Shareholders' Equity 351 Accumulated Depreciation -29.000 Common Shares - 95,000 issued 95,000 352 Retained Earnings 170.560 353 Total Shareholder's Equity 265,560 354 Total Assets $315,960 Liabilities & Owner's Equity $315,960 355 356 357 358 360 361 362 363 364 365 367 368 369 370 At 2020, Razul has authorized 160,000 common shares and 12,000 preferred shares. The preferred shares will be cumulative and pay $6 dividends. The 95,000 shares issued were issued to Razul. He will maintain control of the company and sit on the board of directors. Transactions during 2021 a) On January 1, Holister purchased a strategic investment of 17,500 shares in Gregor Inc. for $14 per share. This represents 32% of Gregor Inc. common shares. On December 31, Gregor Inc. declares and pays a $71,000 dividend and reports a net income of $380,000. Holister will use the equity method to record this investment. b) On January 1, Razul has located a few private investors that wish to purchase shares in the new corporation. Some want common shares, while other are interested in preferred shares. Holister Electric Inc. issued 45,000 common shares for $112,500 cash and issued 9,000 preferred shares for $36,000 cash. 371 373 374 375 376 377 * 378