Hammond Manufacturing Inc. was legally incorporated on January 2, 2020. Its articles of incorporation granted it the right to issue an unlimited number of common shares and 100,000 shares of $13.7 non-cumulative preferred shares. The following transactions are among those that occurred during the first three years of operations: 2020 Jan. 12 Issued 40,150 common shares at $4.1 each. 20 Issued 9,000 common shares to promoters who provided legal services that helped to establish the company. These services had a fair value of $29,000. 31 Issued 73,000 common shares in exchange for land, building, and equipment, which have fair market values of $353,000, $473,000, and $41,000, respectively. Mar. 4 Purchased equipment at a cost of $8,090 cash. This was thought to be a special bargain price. It was felt that at least $10,100 would normally have had to be paid to acquire this equipment. Dec. 31 During 2020, the company incurred a loss of $89,000. The Income Summary account was closed. 2021 Jan. 4 Issued 4,000 preferred shares at $65 per share. Dec. 31 The Income Summary account was closed. Profit for 2021 was $209,000. 2022 Dec. 4 The company declared a cash dividend of $0.92 per share on the common shares payable on December 18 and also declared the required dividend on the preferred shares. 18 Paid the dividends declared on December 4. 31 Profit for the year ended December 31, 2022, was $164,615. The Income Summary account was closed. Required: 1. Journalize the transactions for the years 2020, 2021, and 2022. The company does not use a cash dividends account.

Analysis Component: Determine the net assets of Hammond Manufacturing Inc. for 2020, 2021, and 2022. Is the trend favourable or unfavourable? 2020 2021 2022 Net assets Trend 3. Prepare the equity section on the December 31, 2022, balance sheet. HAMMOND MANUFACTURING INC. Equity Section of the Balance Sheet December 31, 2022 Contributed capital: > Total contributed capital $ 0 Total equity $ 0 Journal entry worksheet Record the declaration of dividends. Note: Enter debits before credits. Date General Journal Debit Credit Dec 04, 2022 Retained earnings Common dividends payable Preferred dividends payable Record the payment of dividends. Note: Enter debits before credits. Date General Journal Debit Credit Dec 18, 2022 Preferred dividends payable Common dividends payable Cash Record entry Clear entry View general journal Check my work 2. Prepare the statement of changes in equity for the year ended December 31, 2022. (Amounts to be deducted should be indicated by a minus sign.) HAMMOND MANUFACTURING INC. Statement of Changes in Equity For Year Ended December 31, 2022 Preferred Common Retained Shares Shares Earnings $ 260,000 $ 867,000 $ 89,000 Total Equity Balance, January 1 Issuance of shares Profit 164,615 Dividends (3,680) 249,935 Balance, December 31 $ 260,000 $ 867,000 $ $ 0