Question 1 Prepare the Equity Section of the Balance Sheet (10 marks) The following accounts are taken from the general ledger of XYZ Company Inc. on December 31, 2018, before the books were closed: Treasury shares, 100 common shares $8,600 Common Shares Subscribed, 100 shares 9,000 Bond Payable, 4.5% 500,000 Common Share Dividends 30,000 Operating Expenses 90,000 168,000 Preferred Shares, no-par, $2, authorization 100,000, cumulative, 27,000 shares issued and outstanding Common Share Subscriptions Receivable 3,000 Premium on Bonds Payable 6,000 Common Shares, no-par, authorization unlimited, 46,100 share issued_1,350,000 46,000 shares outstanding Retained Earnings 653,000 AOCI* losses 150,500 Contributed Capital on Common share retirement 18,900 Sales Revenue 800,000 *also called Reserves Required: Prepare, in good form, the Shareholders' Equity section of the balance sheet at December 31, 2018, after the books are closed. Include a three-line title. Question 2 Journal Entries and Shareholders' Equity (15 marks) Talize Inc. has the following balances at December 31, 2014, its year end: $1,250,000 Preferred Shares, $4.25 cumulative (dividends in arrears for 2013 and 2014) 100,000 shares authorized, 25,000 issues and outstanding Common Shares, unlimited authorized, 2,500,000 shares outstanding 4,500,000 Retained Earnings 5,000,000 During 2015: Jan 2 Issued 20,000 common shares in exchange for machinery fair valued at $40,000. The common shares had a market value of $1.80 per share May 5 All required dividends were declared on preferred shares and a $.20 common share cash dividend was declared on common. Dividends will be distributed on Jan 2 2016. Separate both share classes. July 15 Retired 5,000 preferred shares at $58 per share Sept 25 Talize issued 2,000 preferred shares and 1,000 common shares to an investor for $100,000. At the issue date, the market value of the preferred shares was $45 per share and the market value of the common shares was $6 per share Oct 31 Talize declared and issued a 5% share dividend on the common shares. The market value of the shares at declaration date was $3.00 per share Required: a) Journalize all the transactions for 2015 (10 marks) b) Prepare, in good form, the Shareholders' Equity section of the balance sheet at its year end, December 31, 2015. Net income for 2015 was $520,000. Total comprehensive income for 2015 was $650,000 which includes net income plus a gain of $130,000 on FV-OCI Investments. Use a three-line title. (5 marks) Question 3 Participating Preferred Shares [5 marks) The shareholders' equity section of a firm's balance sheet reflects the following at the end of the current year: Preferred shares, $6, cumulative, fully participating, 3,000 shares outstanding Common Shares, 100,000 shares outstanding $300,000 $500,000 (Matching dividend, if applicable, $.30) The preferred shares fully participate based on the relative annual total base dividend for the current year, once the common shareholders receive their match. There were two years of dividends in arrears on the preferred shares at the beginning of the current year. The firm declares $110,000 in dividends at the end of the current year. Required: Prepare a schedule to show how dividends will be allocated this year. State the total amount of dividends to be allocated to each share class Question 4 Bonds (23 marks) Terra Company issued a $300,000, 7.50%, 10-year bond on June 1, 2015. Additional information on the bond follows: Bond Date: January 1, 2015 Maturity Date: December 31, 2024 Yield (Market) Rate: 8% Interest Payment Date: Interest is paid annually on December 31 of each year Terra's year end: September 30 Required: Round calculations to the nearest dollar a) Calculate the present value of the bond assuming that it had been issued on January 1, 2015. Show calculations/keystrokes. (1 mark) b) Prepare a bond amortization table from January 1, 2015 until December 31, 2018. Show each annual interest payment. (3 marks) c) Calculate the total amount of cash received by Terra on June 1, 2015, reflecting the fact the bond was issued on June 1, 2015. Make the journal entry to record the bond issue on June 1, 2015. (4 marks) d) Prepare the adjusting entry required at Terra's year end, Sept 30, 2017. (2 marks) e) Prepare the journal entry on Terra's books to make the December 31, 2017 interest payment to its investors. (2 marks) f) On July 1, 2018, Terra Company decides to retire 20% of the bonds at 98 plus accrued interest. (i) Make the entry to record interest up to July 1 including interest payable (interest will be paid when the bond is retired in part (ii) below) (3 marks) (ii) Make the entry to retire the bonds. (5 marks) g) Make the entry on Terra's books on December 31, 2018 to pay out interest to the remaining bondholders