In: Accounting
Sarasota Limited has two classes of shares outstanding:
preferred ($5 dividend) and common. At December 31, 2019, the
following accounts and balances were included in shareholders’
equity:
Preferred shares, 270,000 shares issued (authorized, 1,000,000 shares) | $ 2,900,000 | |
Common shares, 900,000 shares (authorized, unlimited) | 24,500,000 | |
Contributed surplus—preferred | 150,000 | |
Contributed surplus—common | 1,500,000 | |
Retained earnings | 5,000,000 | |
Accumulated other comprehensive income | 200,000 |
The contributed surplus accounts arose from net excess of proceeds
over cost on previous cancellations of shares of each respective
class. The following transactions affected shareholders’ equity
during 2020:
Jan. 1 | Issued 24,000 preferred shares at $24 per share. | |
Feb. 1 | Issued 48,000 common shares at $19 per share. | |
June 1 | Declared a 2-for-1 stock split (common shares). | |
July 1 | Purchased and retired 27,000 common shares at $14 per share. | |
Dec. 31 | Net income is $2,050,000; comprehensive income is $2,000,000. | |
Dec. 31 | The preferred dividend is declared, and a common dividend of $0.45 per share is declared. |
Assume that Sarasota follows IFRS.
1. Prepare the statement of changes in shareholders’ equity for
the company at December 31, 2020. (Enter negative
amounts using either a negative sign preceding the number e.g. -45
or parentheses e.g. (45). Round intermediate calculations to 2
decimal places, e.g. 52.75 and all other answers to 0 decimal
places, e.g. 5,275.)
SARASOTA
LIMITED Statement of Changes in Shareholders' Equity For the Year Ended December 31, 2020December 31, 2020For the Month Ended December 31, 2020 |
||||||||||
Preferred Shares | Common Shares |
Contrib. Surplus – Preferred |
Contrib. Surplus – Common |
Retained Earnings |
Acc.
Other Comprehensive Income |
Total |
||||
Number of Shares |
Share Capital | Number of Shares |
Share Capital | |||||||
Balance January 1, 2020 | $ | $ | $ | $ | $ | $ | $ | |||
Issued preferred shares | ||||||||||
Issued common shares | ||||||||||
2-for-1 stock split | ||||||||||
Reacquired common shares | ||||||||||
Declared dividends – preferred | ||||||||||
Declared dividends – common | ||||||||||
Net income | ||||||||||
Other comprehensive income | ||||||||||
Balance December 31, 2020 | $ | $ | $ | $ | $ | $ | $ |
2. Prepare the shareholders’ equity section of the SFP for the company at December 31, 2020.
3.Prepare the journal entry for the repurchase of 27,000 common shares on July 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round intermediate calculations to 2 decimal places, e.g. 52.75 and all other answers to 0 decimal places, e.g. 5,275.)
4. Prepare the journal entry for the repurchase of 27,000 common shares assuming instead that the repurchase took place on May 31 at the same repurchase price of $14. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round intermediate calculations to 2 decimal places, e.g. 52.75 and all other answers to 0 decimal places, e.g. 5,275.)
1.
No. of Preferred shares |
Prefrred stock (10.74) |
No. of Common shares |
Common stock (27.22) |
Contributed surplus- Preferred |
Contributed surplus- Common |
Treasury Stocks |
Retained earnings | Accumulated other comprehensive income | |
Balance Jan 1, 2020 | 270,000 | $2,900,000 | 900,000 | $24,500,000 | $150,000 | $1,500,000 | $5,000,000 | $200,000 | |
Issued preferred shares | 24,000 | $257,778 | $318,222.22 | ||||||
Issued common shares | 48,000 | $1,306,667 | -$394,666.67 | ||||||
2 for 1 stock split | 948,000 | ||||||||
Reacquisition of common shares | (27,000) | -$378,000 | $378,000 | ||||||
Declared dividend - Preferred | -$1,470,000 | ||||||||
Declared dividend - Common | -$841,050 | ||||||||
Net income | $2,050,000 | ||||||||
Other comprehensive income | $2,000,000 | ||||||||
Balance Dec 31, 2020 | 294,000 | $3,157,777.78 | 1,869,000 | $25,428,666.67 | $468,222.22 | $1,105,333.33 | $378,000.00 | $4,738,950.00 | $2,200,000.00 |
2.
Shareholder's Equity | ||
Preferred stock | $3,157,777.78 | |
Common stock | $25,428,666.67 | |
Contributed surplus- Preferred |
$468,222.22 | |
Contributed surplus- Common |
$1,105,333.33 | |
(Treasury Stocks) | -$378,000.00 | |
Retained earnings | $4,738,950.00 | |
Accumulated other comprehensive income | $2,200,000.00 | |
$36,720,950.00 |
3.
Date | Accounts and explanation | Debit | Credit |
Jul-01 | Common Stock | $378,000.00 | |
Treasury stock | $378,000.00 | ||
(To record repurchase of shares) |
4.
Date | Accounts and explanation | Debit | Credit |
May-31 | Common Stock | $378,000.00 | |
Treasury stock | $378,000.00 | ||
(To record repurchase of shares) |