In: Accounting
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) |
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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.
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 | |||||