Question

Banner Publications was organized early in 2008 with authorization to issue 10,000 preference shares of $100 par value and 1 million ordinary shares of $1 par value. All the preference shares were issued at par, and 400,000 ordinary shares were sold for $15 per share. The preference shares pay a 10 percent noncumulative dividend.

  

During the first five years of operations (2008 through 2012) the corporation earned a total of $4,100,000 and paid dividends of $.80 per share each year on the ordinary shares. In 2013, however, the corporation reported a loss of $1,100,000 and paid no dividends.

  

a.

Prepare the shareholders’ equity section of the statement of financial position at 31 December 2013. Include a supporting schedule showing your computation of retained earnings at end of reporting period. (Hint: Income increases retained earnings, whereas dividends and losses decrease retained earnings.) (Input all amounts as positive values. Omit the "$" sign in your response.)

  

BANNER PUBLICATIONS
Partial Statement of Financial Position
December 31, 2013
Shareholders' equity:
(Click to select)Manufacturing overheadSalaries payableRetained earningsNoncumulative Preference sharesRental equipment			$
(Click to select)Preference sharesSelling and administrative expensesSalaries payableRetained earningsOrdinary shares
(Click to select)Cost of goods soldAdditional paid-in capital: Preference sharesUtilities expenseWork in process inventoryShare premium: ordinary shares
Total paid-in capital			$
Retained earnings			$
(Click to select)LossProfit			$
(Click to select)Less: Ordinary share dividendsAdd: Preference share dividendsAdd: Ordinary share dividendsLess: Preference share dividendsRental equipment	$
(Click to select)Less: Preference share dividendsAdd: Ordinary share dividendsRental equipmentLess: Ordinary share dividendsAdd: Preference share dividends	$		$
Retained earnings, December 2012			$
(Click to select)Add: ProfitLess: Loss of 2013			$
Retained earnings, December 31, 2013			$
Total shareholders' equity			$

Answer 1

BANNER PUBLICATIONS
Partial Statement of Financial Position
December 31, 2013	Calculations
Shareholders' equity:
Noncumulative Preference shares		1,000,000.00	(10,000 shares x $100)
Ordinary shares		400,000.00	(400,000 shares x $1)
Share premium: ordinary shares		5,600,000.00	[400,000 shares x ($15 - $1)]
Total paid-in capital		7,000,000.00
Retained earnings
Profit		4,100,000.00
Less: Preference share dividends	500,000.00		(10,000 shares x $100 x 10% x 5 years)
Less: Ordinary share dividends	1,600,000.00	2,100,000.00	(400,000 shares x $0.80 x 5 years) / Sub-total
Retained earnings, December 2012		2,000,000.00
Less: Loss of 2013		1,100,000.00
Retained earnings, December 31, 2013		900,000.00
Total shareholders' equity		7,900,000.00