Question

Major Communications Ltd., a publicly traded company that specializes in data capture, has been in operation for several years. On October 1, 2019, it had 10 million common shares authorized and 1,570,000 shares issued at an average value of $27 per share. As well, there were 1 million preferred shares authorized, with 220,000 of them issued at $14 per share. During the fiscal year ended September 30, 2020, the company generated net income after taxes of $25,380,000 and other comprehensive loss of $4,550,000. On October 1, 2019, the balance in Retained Earnings was $19,760,000 and the balance in Accumulated Other Comprehensive Income was $940,000. The preferred shares pay an annual dividend of $1.30. During the fiscal year 2020, the following transactions affected shareholders’ equity:

1. On November 1, 2019, 390,000 new common shares were issued at $29 per share.

2. On March 15, 2020, a 5% common stock dividend on the outstanding shares was declared and distributed when the market price was $42 per share.

3. On September 1, 2020, a dividend of $5.35 per common share was declared. The date of record was September 15, 2020, with the date of payment being October 5, 2020.

4. The preferred dividend for the year was declared and paid.

Prepare the statement of changes in shareholders’ equity as at September 30, 2020. (If an amount reduces the account balance then enter with negative sign, e.g. -15,000 or in parenthesis, e.g. (15,000).)

Prepare the shareholders’ equity section of the statement of financial position as at September 30, 2020. (Enter negative answers using either a negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).)

Answer 1

			Major communications Ltd.
		Statement of changes in shareholder's equity
			Year ended September 30,2020
				Number of common shares	Common shares	Number of preferred shares	Preferred shares	Retained earnings	Accumulated other comprehensive income	Total
					a		b	c	d	a+b+c+d
Oct 1,2019				1570000	42390000	220000	3080000	19760000	940000	66170000
					(1570000*27)		(220000*14)
Common shares issued				390000	11310000					11310000
					(390000*29)
Stock dividend-common shares				98000	4116000			-4116000		0
				(1570000+390000)*5%	(98000*42)
Cash dividends		(Note:1)						-11296300		-11296300
Net income								25380000		25380000
Other comprehensive loss									-4550000	-4550000
Dec 31,2020				2058000	57816000	220000	3080000	29727700	-3610000	87013700
Note:1
Dividend on common shares-Sep 1,2020:
Dividend=Common shares outstanding*Dividend per share=(1570000+390000+98000)*5.35=$ 11010300
Dividend on preferred shares:
Dividend=Preferred shares outstanding*Dividend per share=220000*1.30=$ 286000
Total cash dividend=11010300+286000=$ 11296300
			Major communications Ltd.
		Statement of shareholder's equity
			Sep 30,2020
				$
Shareholder's equity:
Preferred shares				3080000
Common shares				57816000
Total paid-in capital				60896000
Accumulated other comprehensive income				-3610000
Retained earnings				29727700
Total shareholder's equity				87013700