Instructions

(a) Record the following transactions which occurred consecutively (show all calculations).

1. A total cash dividend of $180,000 was declared and payable to shareholders of record. Record dividends payable on ordinary and preference shares in separate accounts.

2. A 10% ordinary share dividend was declared. The average fair value of the ordinary shares is $18 a share.

3. Assume that net income for the year was $300,000 (record the closing entry) and the board of directors appropriated $140,000 of retained earnings for company expansion.

(b) Construct the equity section incorporating all the above information.

Mahika Corporation has the following capital structure at the beginning of the year: Share capitalpreference 6%, $50 par value, 20,000 shares authorized, 12,000 shares issued and outstanding $ 600,000 Share capital-ordinary, $10 par value, 100,000 shares authorized, 80,000 shares issued and outstanding 800,000 Share premium-ordinary 220,000 Retained earnings 880,000 Total equity $2,500,000