QUESTION 2 (16 marks):

Hamilton Travel Corporation's (HTC) shareholders' equity section at December 31, 2020 appears below:

Shareholders' equity

Common shares, 1,000,000 shares authorized,

80,000 shares issued$720,000

Retained earnings180,000

Total shareholders' equity$900,000

On June 30, 2021, the board of directors of HTC declared a 10% stock dividend, payable on July 31, 2021, to shareholders of record on July 15, 2021. The fair market value of HTC's shares on June 30, 2021, was $12 per share.

On December 1, 2021, the board of directors declared a 2-for-1 stock split effective December 15, 2021. HTC's shares were selling for $16 on December 1, 2021, before the share split was declared. Profit for 2021 was $225,000 and there were no cash dividends declared.

Instructions

(a)Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split. Indicate the date of the entry and if no entry is required, write "no entry".

(b)Fill in the amount that would appear in the shareholders' equity section for HTC at December 31, 2021, for the following items:

1.Common shares$____________

2.Retained earnings$____________

3.Total shareholders' equity$____________

4.Number of common shares issued_____________