Question

AIM Inc. showed the following equity account balances on the December 31, 2019, balance sheet:

Common shares, unlimited authorized shares, 861,000 shares issued and outstanding	$	7,404,600
Retained earnings		2,144,800

During 2020, the following selected transactions occurred:

Feb.	10		Repurchased and retired 163,800 common shares at $10.00 per share; this is the first retirement recorded by AIM.
May	15		Declared a 2:1 share split to shareholders of record on June 1, distributable June 15.
Dec.	1		Declared a 10% share dividend to shareholders of record on December 10, distributable December 20. The market prices of the shares on December 1, December 10, and December 20 were $6.00 $6.70, and $5.00, respectively.
	20		Distributed the share dividend declared December 1.
	31		Closed the credit balance of $777,784 in the Income Summary account.

Required:
a. Journalize the transactions above (assuming the retirements were the first ever recorded by AIM Inc.). The company does not use a share dividends account. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare the equity section on the December 31, 2020, balance sheet.

Answer 1

a.

Journal entries:

Date	Accounts name	Debit	Credit
Feb. 10	Common stock (163800 * 8.6)	1408680
	retained earnings	229320
	cash (163800 * 10)		1638000
May. 15	No entry
Dec. 1	Retained earnings	599592
	Stock dividend distributable		599592
Dec. 20	Stock dividend distributable	599592
	Common stock		599592
Dec. 31	Income summary	777784
	Retained earnings		777784

	Working note:
1	Par value of share:
	Common stock	7404600
	Shares outstanding	861000
	Par value	8.6
2	Stock dividend:
	Shares outstanding beginning	861000
	Less: Retired	-163800
	Shares outstanding	697200
	dividends rate	0.1
	Stock shares	69720
	Par value	8.6
	stock dividend distributable	599592

b.

Balance sheet:

AIM INC.
Equity section of Balance Sheet
December 31. 2020
Contributed capital:
Common stock,	6295716
Retained earnings	2093672
Total equity	8,389,388