E11-1 Determining the Effects of the Issuance of Common and Preferred Shares LO11-1, 11-3, 11-7 Kelly Incorporated was issued a charter on January 15 of this year, that authorized the following share capital: Common shares, no par value, 220,000 shares. Preferred shares, $1.50, no par value, 5,700 shares. (Note: $1.50 is the dividend rate.) During the year, the following selected transactions occurred: a. Sold and issued 36,000 common shares at $22 cash per share. b. Sold and issued 4,600 preferred shares at $24 cash per share. At the end of the year, the company's net earnings equalled $60,000. Required: 1. Prepare the shareholders' equity section of the statement of financial position at the end of the year. KELLY INCORPORATED Shareholders' Equity As at End of Year Share capital: Total share capital 0 Total shareholders' equity $ 0 D. Sold and issued 4,000 preferred shares at 24 per Share. At the end of the year, the company's net earnings equalled $60,000. Required: 1. Prepare the shareholders' equity section of the statement of financial position at the end of the year. KELLY INCORPORATED Shareholders' Equity As at End of Year Share capital: Total share capital 0 Total shareholders' equity $ 0 2. Assume that you are a common shareholder. If Kelly needed additional capital, would you prefer to have it issue additional common or preferred shares? Common shares Preferred shares