Question
Burlington Clothes was incorporated on October 1, 2018. The articles of incorporation indicated the company was authorized to issue 600,000 shares of no par value
Burlington Clothes was incorporated on October 1, 2018. The articles of incorporation indicated the company was authorized to issue 600,000 shares of no par value common shares and 200,000, $2 preferred shares that are cumulative and participating in distributions in excess of 5% of a dividend rate on the common shares. The companys year-end is September 30. The following information relates to the companys shareholders equity account.
- 80,000 common shares issued for cash on October 1, 2018, at $60 per share.
- 20,000 $2 preferred shares were issued on October 1, 2018 at $80 per share.
- 10,000 common shares exchanged on Dec 15, 2018, for land in the downtown core. The land had originally cost the seller $300,000 and had an estimated fair value of $550,000 on Dec 15, 2018 when Burlingtons share were selling for $58.
- 10,000 common shares issued on June 1, 2019; the shares had been subscribed for $55 per share on October 31, 2018.
- October 1, 2020: subscriptions were received for 8,000 common shares at $60 per share. The first installment of $200,000 was received on this date and the final installment was paid on September 30, 2021.
- November 1, 2020: the company purchased 4,000 of its common shares at $58 per share and restored these shares to the status of authorized but unissued.
- December 1, 2020: the company declared a 5% stock dividend for shareholders of record on January 1, 2021. The company was short on cash and therefore could not pay a cash dividend. The companys shares were selling at $57 per share on December 1, 2020.
- March 15, 2021: the company sold 10000 common shares for $450,000.
- Dividends:
Burlington did not declare any dividends until September 30, 2020. At that date total dividends of $500,000 were declared.
- The company incurred the following profits (loss) since incorporation:
2019 (25,000)
2020 675,000
2021 400,000
Required:
- Determine the amount of dividends received by preferred and common shareholders from the September 30, 2020 declaration.
- Prepare the journal entries for 2020-21 fiscal year.
- Prepare the statement of changes in equity and the shareholders equity section of the balance sheet for September 30, 2021.
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