On December 31, 2014 Oyamas equity section of its balance sheet appeared as follows: During the year
Question:
On December 31, 2014 Oyama’s equity section of its balance sheet appeared as follows:
During the year ended December 31, 2015 Oyama Corp. (Oyama) had the following equity-related transactions and economic events.
i. On January 2, Oyama issued 500,000 common shares for \($8\) each.
ii. On February 28, Oyama issued 100,000 preferred shares for \($100\) each.
iii. On June 30, Oyama paid a dividend of \($0.25\) per common share.
iv. On September 30, Oyama declared a reverse stock split whereby the number of common shares outstanding was reduced by half. A shareholder that had 1,000 shares before the reverse stock split would have 500 after the split.
v. On December 31, Oyama declared and paid a dividend to preferred shareholders of \($5\) per share.
vi. On December 31, Oyama declared and paid a dividend of \($0.30\) per common share.
vii. Net income for 2015 was $750,000.
Required:
a. Prepare the journal entries required to record items (i) through (vi).
b. Prepare the equity section of Oyama’s balance sheet on December 31, 2015 and provide comparative information for December 31, 2014.
c. Show the equity section of Oyama’s balance sheet on December 31, 2014 as it would have been reported in the 2014 annual report. Explain the difference between the equity section for 2014 as reported in the 2015 annual report versus the 2014 annual report.
d. Calculate earnings per share and return on shareholders’ equity for the year ended December 31, 2015. If earnings per share for 2014 had been reported as \($0.50\) per share, what amount would be reported for the year ended December 31, 2014 in the 2015 annual report? ;
e. How did the reverse stock split affect the performance of Oyama?
Step by Step Answer:
