The equity accounts for Kalimantan Corp. showed the following balances on December 31, 2013:
Preferred shares, $2 non-cumulative,
Unlimited shares authorized ............................................................................ $ -0-
Common shares, unlimited shares authorized,
100,000 shares issued and outstanding .......................................................... 640,000
Retained earnings............................................................................................... 864,000
The company completed these transactions during 2014:
.:.
Required
1. Prepare General Journal entries to record the transactions and closings for 2014.
2. Prepare the statement of changes in equity for the year ended December 31, 2014.
SOLUTION:
Part 1
Journal entries:
Jan. 10 Cash 192,000
Common Shares, (20,000 × $9.60) 192,000
Issued common shares
15 Share Dividends or Retained Earnings 117,600
Common Share Dividend Distributable 117,600
120,000 × 10% = 12,000 shares × $9.80.
Feb. 15 Common Share Dividend Distributable 117,600
Common Shares 117,600
Distributed share dividend.
Mar. 2 Cash Dividends or Retained Earnings 158,400
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Common Shares Dividends Payable 158,400
Declared dividend on 132,000 outstanding shares
31 Common Shares Dividends Payable 158,400
Cash 158,400
Paid cash dividend
Apr. 10 No entry. 132,000 common shares × 3:1 split = 396,000
common shares outstanding as a result of the split.
Nov. 11 Cash (12,000 × $20) 240,000
Preferred Shares 240,000
Issued preferred shares
Dec. 1 Cash Dividends or Retained Earnings 182,400
Common Shares Dividends Payable 158,400
Preferred Shares Dividends Payable 24,000
$2.00 × 12,000 = 24,000; $182,400 – $24,000 = $158,400.
Dec. 15 Common Shares Dividends Payable 158,400
Preferred Shares Dividends Payable 24,000
Cash 182,400
Dec. 31 Income Summary 1,160,000
Retained Earnings 1,160,000
Closed the Income Summary account
Dec. 31 Retained Earnings 458,400
Cash Dividends 340,800
Share Dividends 117,600
Closed the dividend accounts (if Cash Dividends and Common Share Dividends were debited on the declaration dates)
Part 2
| KALIMANTAN CORP. Statement of Changes in Equity For Year Ended December 31, 2014 |
|---|
| Preferred Shares | Common Shares | Retained Earnings | Total Equity |
| Balance, January 1 | $ -0- | $640,000 | $ 864,000 | $1,504,000 |
| Preferred shares issued | 240,000 | | | 240,000 |
| Common shares issued | | 192,000 | | 192,000 |
| Common shares dividend | | 117,600 | (117,600) | -0- |
| Common cash dividends | | | (316,800) | (316,800) |
| Preferred cash dividends | | | (24,000) | (24,000) |
| Net income (loss) | | | 1,160,000 | 1,160,000 |
| Balance, December 31 | $240,000 | $949,600 | $1,565,600 | $2,755,200 |