QUESTION 3

1. 1A

   Sudan Enterprises Inc. reported the following shareholders equity at December 31, 2019:

   Contributed Capital

   Preferred shares, $ 1, no par value, 100,000 shares authorized, cumulative,

   callable at $ 107 plus dividends in arrears;

   issued and outstanding, 20,000 shares $ 2,040,000

   Common shares, no par, 100,000 shares authorized,

   80,000 issued and outstanding 640,000

   Contributed surplus (retirement of common shares) 120,000

   Retained earnings 1,600,000

   The following transactions took place in 2020:

   Jan 20... Redeemed 1,000 preferred shares at the call price. There were no dividends in arrears. (3 marks)

   Jan 28... Declared $ 100,000 in dividends. Use separate accounts for each class of dividends. (3 marks)

   Feb 28.. Retired 8,000 common shares at $ 12 per share. (3 marks)

   Mar 2.... Declared and distributed a 3% common stock dividend. The market value of the shares at that time was $ 11.50. (2 marks)

   Prepare journal entries for the 2020 transactions.

   1B

   You are about to talk to a group of first year students as Humber College about items that affect Retained Earnings. Given the short timeframe, you were asked to speak on two items that increase and two that decrease Retained earnings. List and cite examples of the two items that increase and two that decrease retained earnings. (6 Marks)

   1C

   Share subscriptions

   On April 28, 2020, Sweden Inc. accepted subscriptions for 10,000 of its no par value common shares. Currently, the shares were selling for $ 45 each. A 40% down payment was received with the remainder due in six months. On October 28, 2020, the balance of the subscription price was received, and the shares were issued.

   Instructions

   a) Prepare the journal entries required on April 28, 2020. (4 marks)

   b) Prepare the journal entries required on October 28, 2020. (4 marks)