Klothez, Ltd., reported the following items related to the shareholder equity on its balance sheet as at December 31, 2016:

$1.90 Convertible Preferred shares, 160,000 shares outstanding$ 4,000,000

Common shares, 375,000 shares issued and outstanding 11,250,000

Contributed surplus on repurchase of common shares 186,000

Retained earnings 4,300,000

Additional Information

A.The preferred shares were cumulative and participative.These shares had been issued several years ago when the company was incorporated.As at January 1, 2017, each preferred share could be converted into 2 common shares.Dividends for any given year are determined on the number of shares issued and outstanding at the end of that year.Dividends on preferred shares were last declared in 2014.

B.The company reported net earnings of $1,166,494 for 2017.There were no extraordinary or discontinued items to report in 2017.

C.Assume a 30% tax rate for 2017.The average market adjusted common share price during 2017 was $27.

The following transactions occurred during the year, 2017:

i]On February 1, the company purchased 60,000 common shares for $34.00 per share and retired them on the same day.

ii]On March 1, it issued common share subscriptions for 46,000 shares at $40 each.The subscribers were required to pay $10 on application, $25 at the first instalment call and $5 at the second instalment call.

iii]On April 1, issued 17,500 common shares in exchange for plant and equipment assessed at $420,000.

iv]On May 1, the first instalment of $25 on the share subscription was called.Subscribers for 1,000 failed to pay.

Simulation 1- Section A- continued

v]On July 1, the remaining subscribers paid the second instalment of $5.The company issued share certificates to the remaining subscribers.Those subscribers who had failed to pay on May 1 forfeited the amount they paid on their subscriptions application.

vi]On July 15, the company declared and distributed a 8% stock dividend on all outstanding common shares.The common shares were being traded on that day at the adjusted market price of $28.50 per share after the stock dividend distribution.

vii]On August 1, 30% of the preferred shares converted their shares into common shares.

Prepare journal entries, in proper format, to record all transaction effects in items [i] to [vii] as listed above.