Question 1

On January 1, 2021, Only You Merchandise Ltd. had 5,000 common shares issued for a total of $ 7,500, and no other shares or contributed capital. During 2021, Only You had the following transactions:
Jan 15 Issued 1,500 common shares for $ 1.50 each.
Mar 31 Settled an account for legal expenses by issuing 3,000 shares. The value of the legal services was $ 5,000.
Jun 30 Reacquired 1,700 shares for $ 2.00 each.
Sep 30 Issued 10,000 shares in exchange for equipment with a fair value of $ 22,500.
Instructions
a) Record the transactions.
b) Calculate the number and average price of common shares issued at the end of 2021.

Accepted Answer

The answer of On January 1, 2021, Only You Merchandise...

Question 2

Strict Fitness Ltd. has a December 31 year end. On January 1, 2021, the company had the following shareholder's equity accounts.  Strict Fitness Ltd. had the following transactions during 2021:
  The company reported net income of $ 520,000 and comprehensive income of $ 592,000 for 2021.
Instructions 
a) Record all of the transactions.
b) Prepare the Statement of Changes in Shareholders' Equity.
c) Calculate Strict Fitness' 2021 earnings per share. (Hint: weighted average number of common shares outstanding has been correctly computed at 208,167 shares)

Accepted Answer

c)
Cumulative dividend entitled by preferred shareholders = $ 5 x 6,500 = $ 32,500
Earnings available to common shareholders = $ 520,000 - $ 32,500 = $ 487,500
Weighted average number of common shares outstanding = 208,167
2021 EPS = $ 487,500 / 208,167 = $ 2.34 per share

Question 3

The following is information taken from the shareholders' equity section of the projected summary financial statements of Deer Fly Corp. to December 31, 2021, prior to the board of directors' meeting to decide on dividends or other share transactions related to its 10,000 issued common shares for the year.  Instructions
Prepare in three-column comparative format, the shareholders' equity section as it would appear under each of the following possible options that the board is considering. Only one of the options will be chosen, so assume they are mutually exclusive. Describe any additional disclosure that would be required. 
a) The board declares a 20% stock dividend.
b) The board approves a 3-for-1 stock split.

Accepted Answer

Additional disclosure in each case would include the number of shares authorized and issued. In the case of b) this would be the only change in the equity section from before the split.

Question 4

Lake Ltd. was incorporated July 1, 2020. The company is authorized to issue an unlimited number of preferred and common shares. The company entered into the following transactions during its fiscal year ending June 30, 2021:
Jul 10 Issued 100,000 common shares for $ 12.50 per share.
Jul 15 Issued 400,000 common shares for $ 13 per share.
Sep 30 Issued 30,000 common shares in return for a warehouse. The common shares were trading for $ 15.50 on the date the warehouse was acquired. The assessed value of the warehouse on that date was $ 450,600.
Mar 16 Issued 1,000 preferred shares for $ 95 per share.
May 10 Reacquired 65,000 common shares for $ 15 per share.
Instructions
Record the above transactions.

Accepted Answer

The answer of Lake Ltd. was incorporated July 1, 2020....

Question 5

Jenny OTB Corporation reports the following shareholders' equity as of December 31, 2021:  Instructions 
a) Assume the board of directors declares dividends totaling $ 1,500,000 to the shareholders. The preferred shares are cumulative, and no dividends were declared last year. Calculate the amount per share each class of shares will receive.
b) Assume the board of directors authorizes a 2-for-1 split on the common shares. Calculate the number of shares outstanding after the split and the average per share amount for both classes of shares.
c) Assume the board of directors authorizes a 10% stock dividend on the common shares after the stock split. The current selling price of the common shares is $ 11. Prepare the journal entry to record the declaration and distribution of the stock dividend.

Accepted Answer

The answer of Jenny OTB Corporation reports the following shareholders'...

Question 6

On January 1, 2020, Accounting For You Professional Corporation had $ 2,000,000 of common shares that were issued at $ 10 and retained earnings of $ 1,000,000. The corporation issued 100,000 common shares at $ 13 per share on July 1. On August 1, 2020, the company declared a $ 0.50 cash dividend to be paid on August 31, 2020 to shareholders of record on August 15, 2020. On December 15, the board of directors declared a 10% stock dividend to shareholders of record on December 31, 2020, payable on January 15, 2021. The market value of Accounting For You Professional Corporation shares was $ 15 per share on December 15 and $ 14 per share on December 31. Profit for 2020 was $ 500,000.
Instructions
a) Journalize the entries related to the above transactions.
b) Prepare the shareholders' equity section of the balance sheet for Accounting For You Professional Corporation at December 31, 2020.
c) Calculate the dividend payout ratio for 2020.

Accepted Answer

The answer of On January 1, 2020, Accounting For You...

Question 7

Westcock Shipbuilding Ltd. has a December 31 year end. On January 1, 2021, the company had the following shareholder's equity accounts.  Westcock Shipbuilding Ltd. had the following transactions during 2021:
  The company reported a profit of $ 450,000 and other comprehensive income of $ 15,000 for 2021.
Instructions 
a) Record all of the transactions.
b) Prepare the Statement of Changes in Shareholders' Equity.

Accepted Answer

The answer of Westcock Shipbuilding Ltd. has a December 31...

Question 8

Cheers Corporation reported the following information related to the year ended July 31, 2021:  Instructions
Prepare Cheer's statement of comprehensive income, statement of changes in shareholders' equity, and the shareholders' equity section of Cheer's balance sheet at July 31, 2021. Ignore tax effects.

Accepted Answer

The answer of Cheers Corporation reported the following information related...

Question 9

Moe Money

Accepted Answer

The answer of Moe Money...

Question 10

Lee Holdings Ltd. was incorporated on January 2, 2021 and on that date issued 50,000 common shares for cash at $ 1 each. On April 30, Lee issued 1,000 preferred, $ 3 cumulative preferred shares, convertible to common shares at the rate of 6 common shares for one preferred share. The preferred shares were issued for $ 18 each. On October 15, 600 of the preferred shares were converted to common shares. On that date, the market value was $ 1.50 for the common shares and $ 17.50 for the preferred shares. On December 15, 10,000 common shares were reacquired for $ 0.90 each.
Instructions
a) Journalize the share transactions described.
b) Calculate the number of issued shares and average per share amount of each class remaining at the end of the year.

Accepted Answer

The answer of Lee Holdings Ltd. was incorporated on January...

Question 11

Gabrial Ltd. was incorporated February 1, 2021 and is authorized to issue an unlimited number of preferred and common shares. The company entered into the following transactions during the year:
Feb 10 Issued 30,000 common shares for $ 2.30 per share.
Feb 21 Issued 4,000 common shares to the company's accountants as payment for a bill of $ 18,000 for services performed in helping the company to incorporate.
Mar 16 Issued 1,000 preferred shares for $ 95 per share.
Sep 10 Reacquired 3,000 common shares for $ 1.75 per share.
Instructions
Prepare the journal entries to record the above transactions.

Accepted Answer

The answer of Gabrial Ltd. was incorporated February 1, 2021...

Question 12

Sonoma Lakes Ltd. (SLL) has the following authorized share capital:
Unlimited Common voting shares
500,000 Class A, $ 5 cumulative preferred shares
500,000 Class B, $ 10 noncumulative preferred shares
During 2021, SLL had the following share transactions for cash:
Jan 1 Issued 50,000 common shares for $ 100,000.
Mar 12 Issued 1,000 Class A preferred shares for $ 60,000.
Apr 30 Issued 20,000 common shares for $ 2.50 per share.
Jun 20 Issued 3,000 Class B preferred shares for $ 70 per share.
Jul 2 Reacquired 10,000 common shares for $ 3 per share.
SLL did not declare any dividends during 2021. On December 31, 2022, a dividend of $ 3 per share was declared on preferred shares issued.
Instructions
a) Journalize the share transactions.
b) Calculate the number of common shares issued at December 31, 2021 and the average per share amount of common share.

Accepted Answer

The answer of Sonoma Lakes Ltd. (SLL) has the following...

Question 13

Harvey Hovercraft Inc. reported the following shareholders' equity:
Share capital:  Instructions 
a) The board of directors declared a 5% common stock dividend when the market price of the shares was $ 20 per share. Prepare the necessary journal entries to record the declaration and distribution of the common shares dividend.
b) What effect did the stock dividend have on:
i. total assets
ii. total liabilities
iii. total share capital
iv. total shareholders' equity

Accepted Answer

The answer of Harvey Hovercraft Inc. reported the following shareholders'...

Question 14

Shockey Electric Ltd. has a December 31 year end. On January 1, 2021, the company had the following shareholder's equity accounts.  Shockey Electric Ltd. had the following transactions during 2021:
  The company reported income of $ 710,000, including other comprehensive income of $ 12,000 for 2021.
Instructions 
a) Record all of the transactions.
b) Prepare the Statement of Changes in Shareholders' Equity.
c) Calculate Backwater's 2021 earnings per share.

Accepted Answer

The answer of Shockey Electric Ltd. has a December 31...

Question 15

12345678 Ontario Ltd. which has authorized share capital of an unlimited number of common shares, and no other authorized classes of shares, had the following share transactions during 2021, its first year of operations:  Instructions
Record the 2021 share transactions.

Accepted Answer

The answer of 12345678 Ontario Ltd. which has authorized share...

Question 16

On January 1, 2021, the following information appears in the records of Brown Holdings Inc.:  During the year, the company had the following transactions:
Mar 31 Declared cash dividends on common shares of $ 0.50 per share; payable to shareholders of record on April 10, and payable on April 25.
Jun 30 Declared the entire annual dividend required on preferred shares; payable to shareholders of record on July 15, and payable on July 31.
Sep 15 Declared a 10% stock dividend to shareholders of record on October 5, and distributable on October 15.
All dividends were paid or distributed on the due date.
Market price of Brown's common shares at various dates was as follows:  At December 31, 2021 the accounting records indicate that Brown's profit for 2021 was $ 350,000 and other comprehensive income, consisting of a gain on fair value adjustments on equity investments was $ 28,000.
Instructions 
a) Journalize the dividend transactions.
b) Prepare the statement of changes in shareholders equity for the year ended December 31, 2021.
c) Prepare the shareholders' equity section of Brown's balance sheet at December 31, 2021.

Accepted Answer

The answer of On January 1, 2021, the following information...

Question 17

During its first year of operations, Millwoods Enterprises Inc. had the following transactions related to its common shares:
Jan 5 Issued 5,000 common shares to Michelle Vogel for $ 1 each.
Mar 15 Issued 10,000 common shares in exchange for equipment transferred from Vogel. The equipment was valued at $ 40,000.
Apr 10 Issued 3,500 shares to a consulting firm for management consulting services as settlement of a $ 14,000 invoice.
Sep 30 Issued 4,000 common shares to Renee Vogel for $ 5 each.
Instructions
a) Journalize the share transactions.
b) Calculate the average per share amount of the common shares of Millwoods Enterprises Inc. at December 31, 2021.

Accepted Answer

The answer of During its first year of operations, Millwoods...

Question 18

Mana Inc. had the following balances in its shareholders' equity at the beginning of the current year (January 1, 2021):
Preferred shares ($ 1.50, cumulative*, 100,000  *two years of dividends are in arrears.
During the year ended December 31, 2021, the following transactions took place:
1. On January 1, issued 9,000 common shares at $ 18 per share.
2. On July 1, declared a 10% stock dividend on the common shares, market price $ 18.50 per share. The dividend is to be paid on August 15 to shareholders of record on July 31.
3. On August 15, the company paid the stock dividend.
4. On September 15, Ryder's board of directors declared a 4-for-1 stock split.
During the year, the company had a profit of $ 85,000.
Instructions
a) Prepare the journal entries to record the above transactions. Closing entries are not required.
b) Prepare a statement of changes in shareholders' equity for 2021.
c) Prepare the shareholders' equity section of the balance sheet at December 31, 2021.

Accepted Answer

The answer of Mana Inc. had the following balances in...

Question 19

Brown Nose Corporation's shareholders' equity section at December 31, 2020 appears below:
Shareholders' equity  On June 30, 2021, the board of directors of Brown Nose Corporation declared a 10% stock dividend, payable on July 31, 2021, to shareholders of record on July 15, 2021. The fair market value of Brown Nose Corporation's shares on June 30, 2021, was $ 12 per share.
On December 1, 2021, the board of directors declared a 2-for-1 stock split effective December 15, 2021. Brown Nose Corporation's shares were selling for $ 16 on December 1, 2021, before the stock split was declared. Profit for 2021 was $ 225,000 and there were no cash dividends declared.
Instructions
a) Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split.
b) Fill in the amount that would appear in the shareholders' equity section for Brown Nose Corporation at December 31, 2021, for the following items:
1. Common shares $____________
2. Number of shares issued $____________
3. Retained earnings $____________
4. Total shareholders' equity $____________ 
a) Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split.
b) Fill in the amount that would appear in the shareholders' equity section for Brown Nose Corporation at December 31, 2021, for the following items:

Accepted Answer

The answer of Brown Nose Corporation's shareholders' equity section at...

Question 20

The market price of Sanji's Paper Inc.'s common shares was $ 50 per share as quoted in today's Globe and Mail. Earnings per share were $ 5.
Instructions
Calculate the price earnings ratio for Sanji. If the price earnings ratio is high, what can the ratio mean?

Accepted Answer

The answer of The market price of Sanji's Paper Inc.'s...

Quiz 6: Corporations: Additional Topics and IFRS

Moe Money

12345678 Ontario Ltd. which has authorized share capital of an unlimited number of common shares, and no other authorized classes of shares, had the following share transactions during 2021, its first year of operations: Instructions Record the 2021 share transactions.

The market price of Sanji's Paper Inc.'s common shares was $ 50 per share as quoted in today's Globe and Mail. Earnings per share were $ 5. Instructions Calculate the price earnings ratio for Sanji. If the price earnings ratio is high, what can the ratio mean?