Shareholder's Equity Sample Questions

AP11-12 (Change in shareholders' equity) The shareholders' equity of Deer Ltd. at the end of 2016 and 2015 appeared as follows: 2015 Share capital, preferred shares, $2 cumulative, 2,000,000 shares authorized, 25,000 shares issued 200,000 200,000 Share capital, 5,000,000 common shares authorized, 1,200,000 common shares issued (2015-1,000,000 shares) 5,000,000 4,000,000 Retained earnings 3,920,000 3,160,000 Total shareholders' equity $9,120,000 $7,360,000 During 2016, Deer paid a total of $125,000 in cash dividends. Required: a. Assume the preferred shares were not in arrears at December 31, 2015. How was the $125,000 in cash dividends distributed between the two types of shares in 2016? b. Assume the preferred share dividends were in arrears for one year; that is, the dividends were not paid in c. 2015. was the $125,000 in cash dividends distributed between the two classes of shares? that would common shares and retained earnings changed during the year. Provide journal entries account for the changes