Question

1. On January 1, 2021, Urban Faith Limited had 200,000 common shares issued at an average cost of $25 per share. During the year, the following transactions occurred:

May

1

Issued 20,000 common shares for $470,000.

Jun

1

Declared a cash dividend of $3.50 per share to shareholders of record on June 15.

Jun

25

Issued 10,000 common shares for $260,000.

Jun

30

Paid the cash dividend declared on June 1.

5. 
   Profit for 2021 amounted to $885,000.
   
   Instructions
   Prepare journal entries to record the above transactions assuming Urban Faith has a December 31 year end. Be sure to prepare the appropriate closing entries at December 31, 2021.

Answer 1

Date	Account title	Debit	Credit
May. 1	Cash	470,000
	Common stock		470,000
June. 1	Cash dividend (220,000 x $3.5)	770,000
	Dividned payable		770,000
June. 25	Cash	260,000
	Common stock		260,000
June. 30	Dividend payable	770,000
	Cash		770,000
June. 30	Income summary	885,000
	Retained earnings		885,000
	(To close income summary account)
June. 30	Retained earnings	770,000
	Cash dividends		770,000
	(To close dividends account)