Question

The balance sheet for Tactex Controls Inc., provincially incorporated in 2018, reported the following components of equity on December 31, 2019.

Tactex Controls Inc.
Equity Section of the Balance Sheet
December 31, 2019
Contributed capital:
Preferred shares, $1.4 cumulative, unlimited shares authorized; 13,000 shares issued and outstanding	$	385,000
Common shares, unlimited shares authorized; 68,000 shares issued and outstanding		728,000
Total contributed capital	$	1,113,000
Retained earnings		371,000
Total equity	$	1,484,000

In 2020 and 2021, the company had the following transactions affecting shareholders and the equity accounts:

2020
Jan.	1		Sold 23,000 common shares at $9.94 per share.
	5		The directors declared a total cash dividend of $224,000 payable on Feb. 28 to the Feb. 5 shareholders of record. Dividends had not been declared for the years 2018 and 2019. All of the preferred shares had been issued during 2018.
Feb.	28		Paid the dividends declared on January 5.
July	1		Sold preferred shares for a total of $156,100. The average issue price was $20 per share.
Dec.	31		Closed the dividend accounts along with the $576,100 credit balance in the Income Summary account.
2021
Sept.	5		The directors declared the required cash dividend on the preferred shares and a $0.7 per common share cash dividend payable on October 28 to the October 5 shareholders of record.
Oct.	28		Paid the dividends declared on September 5.
Dec.	31		Closed the Cash Dividends account along with the $542,500 credit balance in the Income Summary account.

Required:
1. Prepare journal entries to record the transactions and closings for 2020 and 2021. The company uses a cash dividends account to record declared dividends.

2. Prepare a statement of changes in equity for the year ended December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

3. Prepare the equity section of the company’s balance sheet as of December 31, 2021.

Answer 1

Date	Account Title and Explanation	Debit	Credit
Jan.1.2020	Cash	$228,620
	Common Stock (23,000×$9.94)		$228,620
Jan.05.2020	Cash Dividend	$224,000
	Preferred DividendPayable(13,000×$1.4) × 3 Years		$54,600
	Common Stock Dividend Payable		$169,400
Feb.28.2020	Preferred Dividend Payable	$54,600
	Common Stock Dividend Payable	$169,400
	Cash		$224,000
July.01.2020	Cash	$156,100
	Preferred Shares (156,100/20=7,805)		$156,100
Dec.31.2020	Retained Earnings	$224,000
	Cash Dividends		$224,000
Dec.31.2020	Income Summary	$576,100
	Retained Earnings		$576,100
Sep.05.2020	Cash Dividend	$92,827
	Preferred Dividend Payable (13,000 + 7,805) × 1.4		$29,127
	Common Stock Dividend Payable (68,000 + 23,000 × 0.7)		$63,700
Oct.28.2021	Preferred Dividend payable	$29,127
	Common Stock Dividend Payable	$63,700
	Cash		$92,827
Dec.31.2021	Retained Earnings	$92,827
	Cash Dividend		$92,827
Dec.31.2021	Income Summary	$542,500
	Retained Earnings		$542,500

Requirement 2) Statement of change in equity Dec 31 2021

	Preferred Shares	Common Shares	Retained Earnings	Total Equity
Balance January 1	$ 541,100	$ 956,620	$ 723,100	$ 2,220,820
Issuance of Shares	-	-	-	-
Net Income			$ 542,500	$ 542,500
Dividends			$ -92,827	$ -92,827
Total	$ 541,100	$ 956,620	$ 1,172,773	$ 2,670,493

Requirement 3) Equity Section

Contributed Capital
Preferred shares, $2.20 cumulative, unlimited shares authorized,	$ 541,100
28,845 shares issued and outstanding
Common shares, unlimited shares authorized	$ 956,620
107,000 shares issued and outstanding
Total Contributed Capital	$ 1,497,720
Retained Earnings	$   1,172,773
Total Equity	$   2,670,493