Q1. Hair Force One (HFO) is publicly traded company that manufactures medicine that treats loss of hair and thus, HFO follows IFRS. Information about its shareholders' equity is as follows:

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Hair Force One

Shareholders' Equity

December 31, Year 9

Share capital

Preferred shares, $4 dividend, cumulative and fully participating

(20,000 authorized; 2,000 issued and outstanding)$100,000

Common shares

(100,000 authorized, 50,000 issued and outstanding)$450,000

Contributed capital, preferred share retirement$15,000

Contributed capital, conversion option$1,000

$566,000

Retained earnings (Note 1)$434,000

Shareholders' equity$1,000,000

Note 1: On December 31, Year 9, dividends on preferred shares were one year in arrears.

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Several transactions affecting shareholders' equity took place since January 1, Year 10, and are summarized in chronological order as follows.

1. On March 1, Year 10, the company issued 10,000 common shares as a result of the conversion of convertible bonds at the option of bondholders. On the transaction date, the carrying value of the bonds was $97,000 and the carrying value of the conversion option was $1,000. HFO's shares were actively trading at $10 per share.

2. On June 1, Year 10, the company exchanged 10,000 common shares for a special equipment. The equipment was valued at $120,000 by an independent appraiser. On the transaction date, HFO's shares were actively trading at $12 per share.

3. On September 1, Year 10, the company purchased and retired 14,000 common shares at $14 per share.

4. On December 1, Year 10, the company declared dividends to be paid on February 1, Year 11.

5. On February 1, Year 11, the dividends were paid to the shareholders of common and preferred shares. The shareholders of preferred shares received ^Box1:12 per share.

6. On February 15, Year 11, the company announces net income of $200,000 for the year ended December 31, Year 10

(1) Determine total dividends declared on December 1, Year 10. [16 marks]

(2) Determine the retained earnings amount to be reported for the statement of financial position at December 31, Year 10. [10 marks]