Question

Use information provided below to answer the questions that follow
Lee Corporation is authorized by its article to issue 100000 shares of $5 preferred shares and an unlimited number of common shares. The company started the year with a balance   of Retained earning of $74,000. The table below shows the transactions that occurred during the year of the company’s operations:

Year 2017
Jan 2 Issued 8000 common shares at $3 per share
Feb 15 Paid the promoters $ 3500 in cash

April 30 Issued 9000 common shares in exchange for a equipment valued at $52000 and land valued at $50000
May 31 Paid $2250 to suppliers in kind [3000 preferred shares and 2000 common shares]
August    31 Issued 2000 preferred shares for cash $90 per share.
Sept    10 Board of directors declared cash dividend of $ 2.25 to common shareholders and the dividend for preferred shares
Dec 31 Paid the dividend both to common shareholder and preferred shareholders
December 31 Closed the account with $52000 balance in the income summary
To the Retained earnings

REQUIRED
(A) Journalize the transactions

(B) Make a statement of Retained earnings

(C) Show the equity section of the balance sheet using the proper





Question 2

XYZ Corporation   provided the following information for 2018. the company closed last year statement of Earnings with $32000


Dividend paid on 50,000 common shares $1.20 per share
Preferred Shares ,$5, 100000 authorized , 25000 shares issued and outstanding $160000
Net income $22300
Paid preferred share dividend for year 2018

Required
Calculate the Retained Earning on December 31, 2018 using a T-Acount

Answer 1

1.

Journal entries for Lee Corporation:

Jan 2

Cash A/c -Dr 24000

To common equity A/c 24000

Feb 15

Drawings A/c -Dr 3500

To Cash A/c. 3500

April 30

Equipment A/c -Dr 52000

Land. A/c -Dr. 50000

To common equity. A/c. 27000

To share premimum A/c. 75000

May 31

Suppliers A/c. - Dr. 2250

Discount on issue A/c- Dr. 18750

To Common Equity A/c 6000

( 2000*3)

To preferred stock A/c. 15000

(3000*5)

Aug 31st

Cash A/c. -Dr. 180000

To preferred Stock 10000

To share premimum 170000

Sept 10th

Retained earnings A/c -Dr 54000

To Dividend payable A/c. 54000

Dec 31st

Dividend. A/c -Dr 54000

To Cash A/c 54000

Common shares = 19000shares* 2.25 = 42750

Preferred Shares = 5000 shares * 2.25 = 11250

Total Dividend. = 54000

Statement of Retained Earnings:

Opening Retained Earnings = 74000

Current year profits = 52000

Less : Dividend paid = (54000)

Closing retained earnings = 72000

Statement of Equity:

Common stock: 19000shares*3 = 57000

Preferred shares: 5000 Shares*5 = 15000

Retained earnings = 72000

Total Equity = 144000

2.

Particulars	Amount	Particulars	Amount
Dividend common stock	60000	Balance b/d	32000
Dividend pref. stock	35000	Net income	22300
		Balance c/d	40700
	95000		95000

Note dividend payable on pref. stock = 160000 - paidup capital 125000 = 35000