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The December 31, 2014, equity section of Zalicus Inc.’s balance sheet appears below. Zalicus Inc. Equity...

The December 31, 2014, equity section of Zalicus Inc.’s balance sheet appears below.

Zalicus Inc.
Equity Section of the Balance Sheet
December 31, 2014
Contributed capital:
Preferred shares, $3.75 cumulative, 32,000 shares authorized and issued	$	1,580,000
Preferred shares, $10 non-cumulative, 8,800 shares authorized and issued		590,000
Common shares, 320,000 shares authorized and issued		1,670,000

Total contributed capital	$	3,840,000
Retained earnings		701,600

Total equity	$	4,541,600

Required:

All the shares were issued on January 1, 2012 (when the corporation began operations). No dividends had been declared during the first two years of operations (2012 and 2013). During 2014, the cash dividends declared and paid totalled $573,300.

1.	Calculate the amount of cash dividends paid during 2014 to each of the three classes of shares. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

	Cash Dividends
Cumulative preferred shares
Noncumulative preferred shares
Common shares

Assuming net income earned during 2014 was $1,210,000, determine the December 31, 2013, balance in retained earnings.

Retained earnings balance

Prepare a statement of changes in equity for the year ended December 31, 2014. (Amounts to be deducted should be indicated by a minus sign.)

ZALICUS INC.
Statement of Changes in Equity
For Year Ended December 31, 2014
	Preferred shares, $3.75 cum.	Preferred shares, $10 Non-cum.	Common shares	Retained earnings	Total equity
Balance, January 1



Balance, December 31	$0	$0	$0	$0	$0

Expert Solution

1.

Dividend on cumulative preferred shares was not paid for the years 2012 and 2013. Hence, in 2014, it will paid for 3 years i.e. 2012, 2013 and 2014.

Cash dividend to be paid on cumulative preferred shares = (32,000 x 3.75) x 3

= $360,000

Cash dividend to be paid on non cumulative preferred shares = 8,800 x 10

= $88,000

Hence, cash dividend to be paid to common shareholders = 573,300 - 360,000 - 88,000

= $125,300

2.

Retained earnings balance as on December 31, 2014 = Retained earnings balance as on December 31, 2013 + Net income - Cash dividend paid

701,600 = Retained earnings balance as on December 31, 2013 + 1,210,000 - 573,300

Retained earnings balance as on December 31, 2013 = 701,600 + 573,300 - 1,210,000

= $64,900

3.

Statement of changes in equity

For the year ended December 31,2014

	Preferred shares, $3.75 cum.	Preferred shares, $10 non-cum.	Common shares	Retained earnings	Total equity
Balance, Jan.1	1,580,000	590,000	1,670,000	64,900	3,904,900
Net income				1,210,000
Dividends paid				-573,300
Balance, December 31	1,580,000	590,000	1,670,000	701,600	4,541,600

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ekkarill92 answered 2 years ago

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