Dividends and Common shares

1. In 2020, Pauline and some of her friends invested money to start a company named LADIEZ Corporation. The following transactions oc- curred during 2020. Jan 1 The corporate charter authorized 77,000 shares of 3%%, cumulative preferred shares and unlimited no-par value common shares. lan 6 Issued 157,000 common shares at $9 per share to Elizabeth and other investors. Jan 7 Issued another 590 common shares to Elizabeth in exchange for her services in organizing the corporation. The shareholders agreed that the services were worth $9,440. Jan 12 |Issued 4,200 preferred shares for $336,000. lan 14 Issued 9,000 common shares in exchange for equipment. The fair market value of the equipment could not be readily determined, but the market price of the common shares on this date was $13 per share. Nov 15 The first annual dividend on preferred shares declared. Dec 20 Paid the dividends declared on preferred shares. Dec 31 Estimated income tax expense of $44,700. LADIEZ Corporation generated a $105,000 (after income tax) during the year. The company uses the retained earnings account to record dividends. a) Prepare the amount of journal entries to record the above transactions in 2020 for Nov 15 and Dec 20 Nov 15 Answer Retained Earnings Answer Answer Dividends Payable Answer Dividend declared on preferred shares Dec 20| Answer Dividends Payable Answer Answer Cash Answer b) Prepare the statement of retained earnings for the year ended December 31, 2020. LADIEZ Corporation Calculation of Retained Earnings For the Year Ended December 31, 2020 Opening Balance Answer Add; Net Income Answer Less: Cash Dividends - Preferred Answerl Balance - December 31, 2020 Answer c) Prepare the shareholders' equity section of the balance sheet as at December 31, 2020. LADIEZ Corporation Balance Sheet (Partial)The shareholders' equity section of Genghis Corporation's balance sheet at January 1, 2020 was as follows. Both preferred shares and common shares have no par value. Balance - December 31, 2020 Answer Genghis Corporation Balance Sheet (partial) As at January 1, 2020 Shareholders' Equity Contributed Capital Preferred Shares, $4 noncumulative, 210,000 authorized, 2,100, issued and outstanding $185,000 Common Shares, unlimited authorized, 30,000 issued and outstanding $1,120,000 Total Contributed Capital $1,120,000 Retained Earning $253,000 Total Shareholders' Equity $1,373,000 No dividend was declared for common shareholders. However on December 15, 2020, the directors decided to pay dividends to preferred shareholders. The dividend payment date was December 28, 2020. Income before income tax for the year was $250,000. Income tax expense for the year was $50,000. The company uses the retained earnings account to record dividends. a) Calculate the amount of dividend to be paid to preferred shareholders. Dividends Payable: $Answerl b) Prepare journal entry for declaration and payment of preferred dividend. Date Account Title and Explanation Debit Credit Dec 15 Answer Retained Earnings |Answer Answerl Dividends Payable Answer Dividend payable on preferred shares Dec 28 Answerl Dividends Payable Answer Answerl Cash Answer Recording payment of dividend c) Calculate the ending balance of retained earnings for the year ended December 31, 2020. Genghis Corporation Statement of Retained Earnings For the Month Ended December 31, 2020 Opening Balance Answer Add: Net Income Answer Less: Cash Dividends AnswerDecember 31, 2020 Shareholders' Equity Contributed Capital Preferred Shares, 3% cumulative. 77,000 authorized, 4,200 issued and outstanding Answer Common Shares, unlimited authorized, 166,590 issued and outstanding Answe Total Contributed Capital Answer Retained Earnings Answer Total Shareholders' Equity Answe 2. At the end of Pataya Inc.'s third fiscal quarter in 2020, the shareholders' equity section of the balance sheet was as follows Shareholders' Equity Common Shares, unlimited authorized, 73,000 issued and outstanding $890,000 Retained Earnings $514,000 Total Shareholders' Equity $1,404,000 In the fourth quarter of 2020, the following entries related to its equity accounts were recorded. Date Account Title and Explanation Debit Credit Oct 2 Retained Earnings 109,00 Dividends Payable 109,000 Oct 25 Dividends Payable 109,000 Cash 109.000 Oct 30 Retained Earnings 121,000 Common Stock Dividends Distributable 21,000 Nov 5 Common Stock Dividends Distributable 121,000 Common Shares 121,000 Complete the following table showing the equity balances at each indicated date. Oct 2 Oct 25 Oct 30 Nov 5 Common Shares Answer Answer Answer Answer Common Stock Dividends Distributable Answer Answer Answe Answerl Retained Earnings Answer Answer Answer Answerl Total Shareholders' Equity Answer! Answer Answer Answer4. On October 31, 2020, NOP Corporation's shareholders' equity section shows the following balances. NOP Corporation Balance Sheet (partial) As at October 31, 2020 Shareholders' Equity Contributed Capital Common shares, unlimited shares authorized, 31,000 shares issued and outstanding $62,000) Retained Earnings $860,000 Total Shareholders' Equity $922,000 Scenario 1 On October 31, 2020, after preparing the shareholders' equity section shown above, the company declared and immediately distributed a 90% stock dividend. The market price on the date of declaration was $9. The company recorded the stock divi- dends by debiting retained earnings. a) Calculate the ending balance of retained earnings after the stock dividend. NOP Corporation Calculation of Retained Earnings For the Month Ended October 31, 2020 Opening Balance Answer Less: Stock Dividend Answer Balance - October 31, 2020 Answer b) Prepare the shareholders' equity section of balance sheet as at October 31, 2020 (after the stock dividend has been distribu uted). NOP Corporation Balance Sheet (partial) As at October 31, 2020 Shareholders' Equity Contributed Capital Common shares, unlimited shares authorized, 58,900 shares issued and outstanding Answer Retained Earnings Answer Total Shareholders' Equity Answer Scenario 2 On October 31, 2020, after preparing the shareholders' equity section shown at the beginning of this question (excluding Sce- nario 1), the company implemented a 2-for-1 stock split. For this scenario, assume that the stock dividend in scenario 1 did not happen; consider only the original balance sheet.a) Calculate the number of outstanding shares. Outstanding shares: Answer shares b) Prepare the shareholders' equity section of the balance sheet as at October 31, 2020 (after the stock split). NOP Corporation Balance Sheet (partial) As at October 31, 2020 Shareholders' Equity Contributed Capital common shares, unlimited shares authorized, x shares issued and outstanding Answer Retained Earnings Answer Total Shareholders' Equity Answer 5. On November 1, 2020, Krazy Kitty Inc. declared $177,000 of dividends payable to shareholders on Novem- ber 15, 2020. There are 23,800 common shares and 2,000, $3 cumulative preferred shares. No new shares were issued during the year and dividends were last declared in 2017. Krazy Kitty Inc. had retained earnings of $2,505,000 at the beginning of 2020 and earned a net income of $783,000 during the year. Write the journal en- try to record the declaration and subsequent payout of the dividends on November 28, 2020 The company uses the cash dividends account to record dividends. Round all answers to the nearest whole dollar. For transactions that have 2 debits or credits, enter the accounts in alphabetical order. Date Account Title and Explanation Debit Credit Nov 1 Answer Cash Dividends-Common Answer ? Answer Cash Dividends-Preferred, cumulative Answer ? Answer Dividends Payable Answer 177000 Record dividend payable