Question

The following shareholders' equity accounts are reported by Ivanhoe Inc. on January 1:

Common shares (unlimited authorized, 132,500 issued)		$1,855,000
Preferred shares ($4 cumulative, convertible, 100,000 authorized, 4,300 issued)		322,500
Contributed surplus—reacquisition of common shares		28,600
Retained earnings		1,253,000

The following selected transactions occurred during the year:

Feb.		11		Issued 46,500 common shares at $19 per share.
Mar.		2		Reacquired 18,800 common shares at $21 per share.
June		14		Split the common shares 2 for 1 when the common shares were trading at $29 per share.
July		25		Reacquired 310 preferred shares at $58 per share.
Sept.		16		Reacquired 46,500 common shares for $18 per share.
Oct.		27		Declared a 5% common stock dividend distributable on December 13 to shareholders of record on November 24. The fair value of the common shares on October 27 was $21 per share.
Dec.		13		Distributed the stock dividend declared on October 27. The fair value of the common shares on December 13 was $22 per share.

a) Prepare journal entries for the transactions.

b)  Show how each class of shares will be presented in the shareholders’ equity section of the balance sheet at December 31.

Answer 1

Date	Particulars	Debit $	Credit $
Feb-11	Cash	$          883,500
	Common shares		$      651,000
	Contributed surplus - Common shares		$      232,500
Mar-02	Treasuy stock - common shares	$          394,800
	Cash		$      394,800
Jun-14	No Entry
Jul-25	Treasuy stock - preferred shares	$            17,980
	Cash		$         17,980
Sep-16	Treasuy stock - common shares	$          837,000
	Cash		$      837,000
Oct-27	Retained earnings	$          287,595
	Treasuy stock - common shares	$            88,305
	Common shares distributable		$      250,600
	Contributed surplus - Common shares		$      125,300
Dec-13	Common shares distributable	$          250,600
	Common shares		$      250,600
	Balance sheet as on Dec 31
	Particulars	$
	Total stockholders equity
	Common shares (554,900 shares x $14)	$       4,026,330
	Preferred shares (4300 shares x 75)	$          322,500
	Contributed surplus - reacquisition of common shares	$            28,600
	Contributed surplus - Common shares	$          357,800
	Retained earnings	$          965,405
	Total stockholders equity	$       5,700,635
	Less Treasury stock
	Treasuy stock - common shares	$     (1,320,105)
	Treasuy stock - preferred shares	$          (17,980)
	Net stockholders equity	$       4,362,550

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