Question

On December 31, 2017, Vernon Vacations Inc. reported the following shareholders’ equity:

• Preferred shares, unlimited authorized, $0.50 cumulative dividend, 200,000 shares

issued and outstanding, dividends have been paid up to date                       $ 400,000

• Common shares, unlimited authorized, 400,000 shares issued and

outstanding                                                                                                      1,000,000

• Contributed surplus from past retirements of common shares                             70,000
• Retained earnings                                                                                              1,500,000
• Accumulated other comprehensive income                                                           30,000

total: $3,000,000

During 2018, the company reported the following transactions and events:

• On January 1, the company reacquired and retired 1,000 preferred shares at a cost of $6 per share.
• On April 30, the company reacquired and retired 20,000 common shares at a cost of $5 per share.
• On October 31, when the common shares were trading for $7 per share, the company declared and distributed a 10% stock dividend on its common shares.
• On December 15, the company declared a dividend of $1 per common share plus the current year’s dividend on the preferred shares. Both dividends were to be paid on January 1, 2019, to shareholders of record on January 5, 2019.
• The company reported net income for the year of $850,000 and negative other comprehensive income for the year of $50,000.

Required:

1. Provide journal entries to record all the transactions set out above.
2. Prepare, in good form, the shareholder’s equity section of the company’s statement of financial position as at December 31, 2018.

Answer 1