Question

Comparative statements of shareholders’ equity for Anaconda International Corporation were reported as follows for the fiscal years ending December 31, 2021, 2022, and 2023.

ANACONDA INTERNATIONAL CORPORATION Statements of Shareholders' Equity For the Years Ended Dec. 31, 2021, 2022, and 2023 ($ in millions)
	Preferred Stock $10 par		Common Stock $1 par				Additional Paid-In Capital				Retained Earnings				Total Shareholders' Equity
Balance at January 1, 2021				60				540				1,838				2,438
Sale of preferred shares	20							860								880
Sale of common shares				6				54								60
Cash dividend, preferred												(2	)			(2	)
Cash dividend, common												(16	)			(16	)
Net income												330				330
Balance at December 31, 2021	20			66				1,454				2,150				3,690
Retirement of shares				(3	)			(27	)			(26	)			(56	)
Cash dividend, preferred												(2	)			(2	)
Cash dividend, common												(20	)			(20	)
3-for-2 split effected in the form of a dividend	10							(10	)
Net income												480				480
Balance at December 31, 2022	30			63				1,417				2,582				4,092
Common stock dividend				8				77				(85	)
Cash dividend, preferred												(2	)			(2	)
Cash dividend, common												(22	)			(22	)
Net income												522				522
Balance at December 31, 2023	30			71				1,494				2,995				4,590

Required:
1. Infer from the statements the events and transactions that affected Anaconda International Corporation’s shareholders’ equity during 2021, 2022, and 2023. Prepare the journal entries that reflect those events and transactions. (Hint: In lieu of revenues and expenses, use an account titled "Income summary" to close net income or net loss.)
2. Prepare the shareholders’ equity section of Anaconda’s comparative balance sheets at December 31, 2023 and 2022.
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Answer 1

	Journal entries for 2021:
S no	Particulars	Debit	Credit
1	Cash	880
	Preferred stock		20
	Paid in capital in excess of par, preferred		860
2	Cash	60
	Common stock		6
	Paid in capital in excess of par, common		54
3	Retained earnings	2
	Cash dividends payable, Preferred		2
4	Cash dividends payable, Preferred	2
	Cash		2
5	Retained earnings	16
	Cash dividends payable, Common		16
6	Cash dividends payable, Common	16
	Cash		16
7	Income summary	330
	Retained earnings		330
	Journal entries for 2022:
8	Common stock	3
	Paid in capital in excess of par, common	27
	Retained earnings	26
	Cash		56
9	Retained earnings	2
	Cash dividends payable, Preferred		2
10	Cash dividends payable, Preferred	2
	Cash		2
11	Retained earnings	20
	Cash dividends payable, Common		20
12	Cash dividends payable, Common	20
	Cash		20
13	Paid in capital in excess of par, preferred	10
	Preferred stock		10
14	Income summary	480
	Retained earnings		480
	Journal entries for 2023:
15	Retained earnings	85
	Common stock		8
	Paid in capital in excess of par, common		77
16	Retained earnings	2
	Cash dividends payable, Preferred		2
17	Cash dividends payable, Preferred	2
	Cash		2
18	Retained earnings	22
	Cash dividends payable, Common		22
19	Cash dividends payable, Common	24
	Cash		24
20	Income summary	522
	Retained earnings		522
B)	Shareholders' equity section
	Paid-in capital	2023	2022
	Preferred stock	20	20
	Common stock	60	54
	Additional paid-in capital	1494	1417
	Total paid-in capital	1574	1491
	Retained earnings	2995	2582
	Total shareholders' equity	4569	4073

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