Question
The following information was taken from the accounting records of Winnifred Corp. at January 1, 2017. The income tax rate is 40%. Preferred shares, $1
The following information was taken from the accounting records of Winnifred Corp. at January 1, 2017. The income tax rate is 40%.
Preferred shares, $1 cumulative, 50,000 shares authorized,
10,000 shares issued $150,000
Retained earnings, balance as of January 1,2017 287,000
Cost of goods sold 635,000
Gain on sale of discontinued segment 80,000
Sales revenue 1,463,500
Selling expenses 215,000
Sales Returns 10,000
Sales Discounts 3,500
Administrative expenses 112,000
Operating income, discontinued segment 33,000
Loss on expropriation of land 46,000
Common shares, unlimited number of shares authorized,
200,000 shares issued 315,000
Jan 1 When the market rate was 12%, Winnifred Corp. issued $2,000,000, 14%, 5-year bonds. Interest is payable semiannually on June 30 and December 31. The corporation uses the effective interest method of amortizing bond premium or discount. (It would be a good idea to construct a bond amortization schedule)
Jan 1 Issued 20,000 Common Shares for 50,000 cash.
Mar 5 Declared cash dividends in the amount of $50,000 to be distributed to the shareholders of record on March 9. Dividends will be paid on March 15.
Mar 10 Declared a 1 for 2 stock split on Common Shares outstanding.
Mar 15 Paid the cash dividend declared on Mar 5.
Jun 30 Made the first interest payment on the bond. The company uses the effective interest method.
July 20 Repurchased 10,000 common shares, the market price was $5 per share.
July 31 Issued 10,000 Preferred shares for 180,000 cash.
Sept 30 Declared a 10% common stock dividend to shareholders of record on Oct 15. Market price at the time was $6 per share. Shares will be distributed Nov 25.
Nov 25 Distributed the common stock dividend.
Dec 31 Made the second interest payment on the bond using the effective interest method.
Dec 31 Closed the income summary account which had a credit balance of $153,000 to Retained Earnings.
Prepare a single step income statement with EPS (25 marks), a statement of changes in equity (5 marks), and a statement of shareholder's equity (10 marks) for the year ended December 31, 2017.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started