Question

Mark Inc. has authorized share capital of an unlimited number of common shares and 1,000,000 preferred, $3 preferred shares. At January 1, 2019, the balance in its shareholders equity includes $45,000 in common shares representing 15,000 shares and $30,000 in preferred shares representing 1,000 shares and retained earnings of $185,000. Profit for the year ending December 31, 2019 was $30,000. No dividends were declared during 2019.
During 2019, Mark Inc. had the following share transactions:
Mar 1 Issued 4,000 common shares for $7 each.
Jun 30 Issued 500 preferred shares for $11 each.
Sep 1 Issued 60,000 common shares in exchange for land valued at $285,000.
Required:
a) Journalize the share transactions.
b) Prepare the equity section of Mark Inc. balance sheet at December 31, 2017 and describe any additional disclosure required related to share capital.

Answer 1

1. Journal Entries:

Date	Particulars	Debit	Credit
Mar 1	Cash (4.000*7)	28,000
	Common Stock (4,000*3)		12,000
	Additional Paid in Capital - Common (4,000*4)		16,000
	(To record issue of 4,000 common shares for $7 each)
June 30	Cash (500*11)	5,500
	Preferred Stock (500*3)		1,500
	Additional Paid in Capital - Preferred (500*8)		4,000
	(To record issue of 500 preferred shares for $11 each)
Sep 1	Land	285,000
	Common Stock (60,000*3)		180,000
	Additional Paid in Capital - Common		105,000
	(To record issue of common shares in exchange for land)

2. Equity Section of Balance Sheet:

Particulars	$	$
Paid up Capital:
Common Stock - Unlimited Shares authorized, 79,000 shares issued and outstanding at $3 per share	237,000
Preferred Stock - 1,000,000 shares authorized, 10,500 shares issued and outstanding at $3 per share	31,500
Paid up Capital		268,500
Additional Paid in Capital:
Common Stock	121,000
Preferred Stock	4,000
Additional Paid in Capital		125,000
Retained Earnings:
Beginning Balance	185,000
Add: Profit	30,000
Total Retained Earnings		215,000
TOTAL SHAREHOLDERS' EQUITY		608,500