QUESTION 2 (14 MARKS)

Bravado Corporation had the following shareholders equity balances at January 1, 2022:

Preferred shares, $5 dividend (unlimited authorized, 20,000 issued)1 $1,000,000

Common shares (unlimited authorized, 115,000 issued) 875,000

Contributed surplus reacquisition of common shares2 34,000

Contributed surplus stock options3 460,000

Retained earnings 973,000

Accumulated other comprehensive income (42,000)

Total shareholders equity $3,300,000

Notes:

1. The preferred shares are cumulative and non-participating. Dividends for 2021 were in arrears at January 1, 2022.

2. The contributed surplus reacquisition of common shares arose from net excess of proceeds over cost on a previous cancellation of common shares.

3. The contributed surplus stock options relate to 200,000 options granted to executives in the past. The stock options are fully vested, and exercisable until December 31, 2022. Each option permits the holder to purchase one common shares for $10.

During 2022, the following transactions affecting shareholders equity occurred:

Mar 1 Issued 10,000 common shares for land valued at $125,000 (based on independent valuation). The market price of the shares was $13 each.

Apr 30 Repurchased for cash and cancelled 15,000 common shares at $17 per share (see Note 2 above).

Sep 15 Declared a total dividend of $364,000 (see note 1 above).

Nov 1 A total of 125,000 options were exercised (see Note 3 above)

Dec 31 The total comprehensive income for the year was determined to be $412,000, which included $397,000 of net income.

Required:

1. a) Prepare journal entries to record the transactions dated
2. (i) March 1, 2022 (2 marks)
3. (ii) April 30, 2022 (3 marks)
4. (iii) November 1, 2022 (3 marks)

1. b) Calculate the dividend declared to the preferred shareholders and to the common shareholders on September 15, 2022 (2 marks)