(Accounting for equity transactions, LO 2, 3) During the year ended June 30, 2007, Utusivik Inc. (Utusivik) had the following equity-related transactions and economic events. On June 30, 2006 the balance in Utusivik’s Common Stock account was $5,000,000 with 2,000,000 shares outstanding, the balance in its Preferred Stock account was $1,000,000 with 50,000 shares outstanding, and Retained Earnings was $8,200,000.
i. On August 1, 2006 Utusivik issued 400,000 common shares for $3,200,000.
ii. On November 30, 2006 Utusivik issued 100,000 preferred shares for $2,000,000.
ili. On December 31, 2006 Utusivik paid a dividend of $0.25 per common share.
iv. On April 30, 2007 Utusivik declared a two-for-one stock split.
v. On June 30, 2007 Utusivik paid dividends to preferred shareholders of $1.50 per share.
vi. On June 30, 2007 Utusivik paid a dividend of $0.25 per common share.
vii. On June 30, 2007 Utusivik obtained the rights to a patent in exchange for 100,000 shares of Utusivik common stock. The market value of Utusivik stock on June 30, 2007 was $12 per share.
viii. Net income for 2007 was $2,300,000.
Required:

a. Prepare the journal entries required to record items (i) through (vii).

b. Prepare the equity section of Utusivik’s balance sheet on June 30, 2007 and provide comparative information for June 30, 2006.

c. Show the equity section of Utusivik’s balance sheet as it would have been reported in the June 30, 2006 annual report. Explain the difference between the equity section for 2006 as reported in the 2007 annual report versus the 2006 annual report.

d. Calculate earnings per share and return on shareholders’ equity for the year ended June 30, 2007. If earnings per share for 2006 had been reported as $1.75 per share, what amount would be reported for 2006 in the 2007 annual report?

e. How did the stock split affect the performance of Utusivik?