Dragon Corporation began business in 2019 and operates in the life sciences industry. You have been hired to complete a Statement of Stockholders Equity at year end 2021 and to compute net income and basic and diluted earnings per share for Dragon Corporation.

Dragon Corporation
Statement of Stockholder's Equity
Thursday, December 31, 2020
Preferred stock, 7% cumulative and convertible with $50 par value, 100,000 shares authorized, ____ shares issued and ____ shares outstanding	$3,900,000
Common stock, $1 par value, 8,000,000 shares authorized, ____ shares issued and _____ outstanding	$4,000,000
Additional paid in capital common stock	$15,000,000
Additional paid in capital - preferred stock	$6,500,000
Additional paid in capital - stock options	$750,000
Total Paid in Capital	$30,150,000
Accumulated Other Comprehensive Income	$676,000
Retained Earnings	$16,590,000
Less: Treasury Stock (40,000 shares)	($2,350,000)
Total Stockholders Equity	$45,066,000

Additional Information:

• All common and preferred shares were issued for cash in 2019. Each share of preferred stock is convertible into one common share. There were no additional capital transactions in 2019 or 2020.
• The common stock is owned equally by Tamara Dragon and Oliver Dragon. The preferred stock is owned entirely by Lamar Dragon with no voting rights or participation.
• No dividends were declared or paid during the year 2020 due to poor economic conditions.
• On June 1, 2019, the company granted five executive employees the option to purchase 500,000 shares (100,000 shares each) of common stock at $20 per share. Under the Black-Scholes option pricing model, total compensation expense is estimated to be $1,000,000. The option becomes exercisable on June 1, 2021, after the employees complete two years of service.
• To generate capital to purchase some investments, on January 1, 2021, Dragon Company authorized the issuance of 20,000, $1,000, 10-year, 6% convertible bonds payable at 98 with interest to be paid annually on December 31. Each $1,000 bond is convertible into 20 common shares.
• Tamara and Oliver met with Jenny Ahn in January 2021, entering into an agreement to purchase for cash two long term investments from Jennys business entities:

1) a newly issued $5 million 20-year 6.5% bond in Yellow Corporation for $4,735,150 with a yield of 7% with interest paid annually at year end.

2) 90,000 newly issued common shares in Blue Corporation for $15M.

Prior to this agreement Jenny owned and controlled 100% of both Yellow Corporation and Blue Corporation. Jenny did NOT exercise her preemptive right upon the issuance of new shares with the admission of Tamar and Oliver as new owners of Blue Corporation.

The following transactions have NOT yet been recorded by Dragon Corporation for 2021:
1/15/21	The company issued the convertible bond payable. The market rate of interest is 5% at the date of issuance.
2/1/21	Due to poor economic conditions during COVID and poor performance, one of the five executives was fired to preserve cash flow.
3/1/21	The above acquisition of investments in Yellow Corp. and Blue Corp. closed on March 1, 2021.
6/1/21	The company repurchased 30,000 common shares of treasury stock at $46 per share.
9/15/21	The company converted 10,000 shares of convertible preferred shares into common shares. The market value of the preferred stock at this date is $230 per share.
9/30/21	One of the executives exercised all of their stock options when the market value was $56 per share. No other options were exercised in 2021.
10/15/21	The company issued 15,000 new common shares in exchange for a patent with a cost basis of $500,000 and a fair market value of $780,000
10/20/21	The company reissued 42,000 shares of the treasury stock at $52.50 per share.
11/30/21	The company declared a 5% stock dividend to all common stockholders of record on December 3, 2021, to be distributed January 3, 2022.
12/15/21	The board of directors declared the preferred stock dividend and a dividend of $.50 per share on the common stock to be paid on January 15, 2022
12/31/21	The market value of the company's preferred stock is $250 per share. The market value of the Yellow Corporation bond investment is $4,914,000.
12/31/21	Dragon Corporation net income before tax for 2021 is $13,500,000 prior to any of the above transactions not yet recorded. Blue Corporation net income after tax for 2021 is $2,200,000. (Hint: you will need to compute Net income after all adjustments.) Income tax rate is 21%.

Market value per common share is as follows:

Date	Dragon Corporation	Blue Corporation
1/1/21	$ 43.00	$ 166.20
1/15/21	$ 47.00	$ 168.50
2/1/21	$ 45.00	$ 166.67
3/1/21	$ 38.00	$ 166.69
6/1/21	$ 46.00	$ 189.00
9/15/21	$ 58.00	$ 150.00
9/30/21	$ 56.00	$ 140.00
10/15/21	$ 52.00	$ 187.11
10/20/21	$ 52.50	$ 148.50
11/30/21	$ 55.00	$ 138.60
12/3/21	$ 60.00	$ 125.00
12/15/21	$ 55.75	$ 168.20
12/31/21	$ 57.00	$ 110.00
1/3/22	$ 55.00	$ 108.60
1/15/22	$ 58.40	$ 108.10

Complete the following in EXCEL prepared in GOOD FORM and using formulas. Organize your analysis appropriately to:

• Prepare the company's Statement of Stockholder's Equity for year-end 2021 in good form. You should submit your excel file along with a pdf of the report in good form.
  • (70 points)

• Compute Net Income and Basic and Diluted Earnings per Share for 2021. Show your calculations and clearly highlight your answers for basic and diluted.
  • (25 points)

• Answer the following questions: (5 points)

• How much cash did Dragon Corporation receive upon the original issuance of stock - before any of the 2021 transactions?
• What are the percentage ownership interests of each of the Dragon Corporation stockholders at year-end 2020?
• On the date of acquisition, what is Dragon Corporations percentage ownership interest in Blue Corporation? In Yellow Corporation?
• What amount are the investments reported on the balance sheet at December 31, 2021?
• How much cash is paid or received in dividends in 2021?