Question
Question 4 Dr. Smith started Biotech Inc. (BTE). on October 1, 2020. On October 1, 2020, BTE issued 100 common shares to Dr. Smith in
Question 4
Dr. Smith started Biotech Inc. (BTE). on October 1, 2020. On October 1, 2020, BTE issued 100 common shares to Dr. Smith in exchange for $10,000 in cash. Also, the following events occurred in December 2020.
- On December 1, 2020, BTE borrowed $1,200,000, 5-year loan, bearing 7% interest..
- On December 10, 2020, BTE issued 1000 preferred Class A shares to investors for $600 each. The articles of incorporation (charter) disclosed that the Class A, non-cumulative preferred shares had a stated value of $ 250 per share.
- On December 28, 2020, BTE declared and paid a 5% stock dividend on the common shares The market value of the common shares before the announcement of the stock dividend was $ 850 per share.
- On December 30, 2020, BTE paid a dividend to the common shareholders of record of $50 per share.
Required:
Please prepare the necessary journal entries for the above transactions above as well as any adjusting entries required at the year-end date December 31, 2020. Narratives are not required.
Date | Account | Debit | Credit |
10/1/2020 |
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12/1/2020 |
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12/10/2020 |
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12/28/2020 |
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12/30/2020 |
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12/31/2020 |
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Question 5
In addition to common shares outstanding, Essex Corporation has the following preferred shares outstanding at the end of 2020,as indicated in the following table.
Preferred shares | Number of shares | Total dividends |
$25 stated value, 10%, non-cumulative
| 1000 shares |
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$100 stated value, 6% cumulative, convertible
| 2500 shares |
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Required:
- Indicate the amount of annual dividend on each issue of the preferred shares by completing the last column of the above table.
- Assume there are one year of dividends in arrears at the beginning of 2020, and Essex declared total dividends of $40,000 in 2020. What is the amount of dividends that the common shareholders will receive in 2020?
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