At December 31, 2021, the records of Lee Corporation reported the following in shareholders'

equity:

Preferred shares, unlimited shares authorized,

no-par value, $2, cumulative, 100,000 shares issued and outstanding'

Common shares, unlimited shares authorized, no-par value,

2,000,000 shares issued and outstanding

Contributed capital on retirement of common shares

Total contributed capital

Retained earnings

Accumulated Other Comprehensive Income

$ 100.000

9.000.000

10,000

9.110.000

870.000

620,000

$ 10,600,000

1 No dividend was paid out in years 2020 and 2021.

During 2022, the following transactions affecting shareholders' equity took place. The December

31, 2022 retained earnings was $1,141,000.

January 2

January 3

April 1

July 22

September 5

Sold and issued 500,000 common shares in exchange for land with an appraised

value of $3.000.000.

Declared $ 220,000 cash dividend payable on April 30.

Declared a 10 percent common stock dividend on all outstanding common

shares as of March 31 to be distributed on May 31. The market price of the

common shares on April 1 was $7 per share.

Repurchased 50,000 common shares at $ 7.25 per share

Common Stock was split 2:1

Lee currently has a loan with Scarborough Bank and Scarborough Bank requires Lee not to exceed

1 to 1 for its debt to equity ratio. On March 31, 2022, total debt for Lee is $ 13,000,000.

Required:

1. Calculate the amount of cash dividend that will be paid to both common and preferred

shareholders on January 3. (2 Marks)

2. Calculate the balance in dividend in arrears (if any) on January 3 after the declaration of cash

dividend. Discuss how dividend in arrears should be recorded. (3 Marks)

3. Prepare the journal entry on April 1. (3 Marks)

4. Explain why Lee prefers to declare a stock dividend on April 1 instead of cash dividend. (4

Marks)

5. Prepare the journal entry on July 22 and September 5. (9 Marks)

6.

Calculate the net income in 2022. (5 Marks)

7. Based on your analysis for this question, discuss how is Lee doing financially and provide

recommendation what you think Lee should do to further enhance their financial position. (3

Marks

1. Calculate the amount of cash dividend that will be paid to both common and preferred

shareholders on January 3. (2 Marks)

2. Calculate the balance in dividend in arrears (if any) on January 3 after the declaration of cash

dividend. Discuss how dividend in arrears should be recorded. (3 Marks)

3. Prepare the journal entry on April 1. (3 Marks)

4. Explain why Lee prefers to declare a stock dividend on April 1 instead of cash dividend. (4

Marks)

5. Prepare the journal entry on July 22 and September 5. (9 Marks)

6.

Calculate the net income in 2022. (5 Marks)

7. Based on your analysis for this question, discuss how is Lee doing financially and provide

recommendation what you think Lee should do to further enhance their financial position. (3

Marks)