Question

Amusement Corp. showed the following amounts in the equity section of its balance sheet at January 1, 2020:

Preferred shares, $2 cumulative (in arrears for 2019), 10,000 shares issued Common shares 40,000 shares issued
Retained earnings
In 2021:

$ 500,000 $ 800,000 $ 500,000

On January 20, 2020, On November 1, 2020, On December 31, 2020

Required

10,000 common shares were issued for $150,000
Cash dividends of $90,000 were declared. Dividends will be paid on January 18, 2021 Amusement Corp. reported revenues of $150,000 and expenses of $80,000 for the year

1. What is the amount of dividend per share owing to preferred shareholders?

2. Prepare journal entries for 2020. Use an Income summary account and Dividend declared account as required

3. Calculate the average issue price per common share for 2020

4. Prepare the statement of changes in shareholders equity for the year ended December 31, 2020

5. Prepare the balance sheet (partial) at December 31, 2020

6. Note: you can skip posting any other point but I need point 5 to be done (balance sheet)-Thank you!

Answer 1

Journal Entries:

Date	Particulars	Debit	Credit
Jan 20	Cash	150,000
	Common Stock		150,000
Nov 1	Retained Earnings	90,000
	Dividends Payable - Common Stock		50,000
	Dividends Payable - Preferred Stock		40,000
Dec 31	Revenues	150,000
	Income Summary		150,000
	Income Summary	80,000
	Expenses		80,000
	Income Summary (150,000-80,000)	70,000
	Retained Earnings		70,000

Preferred Dividends = 10,000 * $2 * 2 years

= $40,000

Common Stock Dividends = 90,000 - 40,000

= $50,000

Statement of Changes in Equity:

Particulars	$	$
Preferred Shares - 10,000 issued	500,000
Common Shares - 50,000 issued	950,000
Total Paid Up Capital		1,450,000
Retained Earnings:
Beginning Balance	500,000
Add: Net Income	70,000
Less: Dividends	(90,000)
Ending Balance		480,000
Total Shareholders' Equity		1,930,000

Balance Sheet (Partial)

Particulars	$	$
EQUITY:
Capital Stock	1,450,000
Retained Earnings	480,000
TOTAL EQUITY		1,930,000