Question

Comparative statements of shareholders’ equity for Anaconda International Corporation were reported as follows for the fiscal years ending December 31, 2018, 2019, and 2020.

ANACONDA INTERNATIONAL CORPORATION Statements of Shareholders' Equity For the Years Ended Dec. 31, 2018, 2019, and 2020 ($ in millions)
	Preferred Stock $10 par		Common Stock $1 par				Additional Paid-In Capital				Retained Earnings				Total Shareholders' Equity
Balance at January 1, 2018				50				450				1,596				2,096
Sale of preferred shares	10							420								430
Sale of common shares				7				63								70
Cash dividend, preferred												(1	)			(1	)
Cash dividend, common												(12	)			(12	)
Net income												220				220
Balance at December 31, 2018	10			57				933				1,803				2,803
Retirement of shares				(4	)			(36	)			(14	)			(54	)
Cash dividend, preferred												(1	)			(1	)
Cash dividend, common												(16	)			(16	)
3-for-2 split effected in the form of a dividend	5							(5	)
Net income												370				370
Balance at December 31, 2019	15			53				892				2,142				3,102
Common stock dividend				7				68				(75	)
Cash dividend, preferred												(1	)			(1	)
Cash dividend, common												(18	)			(18	)
Net income												402				402
Balance at December 31, 2020	15			60				960				2,450				3,485

Required:
1. Infer from the statements the events and transactions that affected Anaconda International Corporation’s shareholders’ equity during 2018, 2019, and 2020. Prepare the journal entries that reflect those events and transactions.
Record sale of preferred stock.  

Record sale of common stock.

Record declaration of cash dividend for preferred shares.

Record payment of cash dividend for preferred shares.

Record declaration of cash dividend for common shares.

Record payment of cash dividend for common shares.

Record transfer of net income to retained earnings.

Record the repurchase of shares for retirement. (Assume weighted average method).

Record declaration of cash dividend for preferred shares.

Record payment of cash dividend for preferred shares.

Record declaration of cash dividend for common shares

Record payment of cash dividend for common shares.

Record the stock split for preferred shares effected in the form of a dividend.

Record transfer of net income to retained earnings.

Record distribution of common stock dividend.

Record declaration of cash dividend for preferred shares.

Record payment of cash dividend for preferred shares.

Record declaration of cash dividend for common shares.

Record payment of cash dividend for common shares.

Record transfer of net income to retained earnings.

2. Prepare the shareholders’ equity section of Anaconda’s comparative balance sheets at December 31, 2020 and 2019.

Answer 1

1	Sl No.	Account			Debit	Credit
					($ in millions)
	1	Cash			430
		Preferred stock				10
		Additional Paid-In Capital				420
		(sale of preferred stock)
	2	Cash			70
		Common Stock				7
		Additional Paid-In Capital				63
		(sale of common stock)
	3	Retained Earnings			1
		Cash dividend payable-Preferred				1
		(declaration of cash dividend for preferred shares)
	4	Cash dividend payable-Preferred			1
		Cash				1
		(payment of cash dividend for preferred shares)
	5	Retained Earnings			12
		Cash dividend payable-Common				12
		(declaration of cash dividend for common shares)
	6	Cash dividend payable-Common			12
		Cash				12
		(payment of cash dividend for common shares)
	7	Income summary			220
		Retained Earnings				220
		(transfer of net income to retained earnings)
	8	Retained Earnings			14
		Common Stock			36
		Additional Paid-In Capital			4
		Cash				54
		(repurchase of shares for retirement)
	9	Retained Earnings			1
		Cash dividend payable-Preferred				1
		(declaration of cash dividend for preferred shares)
	10	Cash dividend payable-Preferred			1
		Cash				1
		(payment of cash dividend for preferred shares)
	11	Retained Earnings			16
		Cash dividend payable-Common				16
		(declaration of cash dividend for common shares)
	12	Cash dividend payable-Common			16
		Cash				16
		(payment of cash dividend for common shares)
	13	Additional Paid-In Capital			5
		Preferred stock				5
		(stock split for preferred shares effected in the form of a dividend)
	14	Income summary			370
		Retained Earnings				370
		(transfer of net income to retained earnings)
	15	Retained Earnings			75
		Common Stock				7
		Additional Paid-In Capital				68
		(distribution of common stock dividend)
	16	Retained Earnings			1
		Cash dividend payable-Preferred				1
		(declaration of cash dividend for preferred shares)
	17	Cash dividend payable-Preferred			1
		Cash				1
		(payment of cash dividend for preferred shares)
	18	Retained Earnings			18
		Cash dividend payable-Common				18
		(declaration of cash dividend for common shares)
	19	Cash dividend payable-Common			18
		Cash				18
		(payment of cash dividend for common shares)
	20	Income summary			402
		Retained Earnings				402
		(transfer of net income to retained earnings)
2			Shareholer's Equity section
					2020	2019
					($ in millions)
		Paid in capital
		Common stock			60	53
		Preferred stock			15	15
		Additional Paid-In Capital			960	892
		Total paid in capital			1035	960
		Retained Earnings			2450	2142
		Total shareholder's equity			3485	3102