In: Accounting
Vermillion Corporation, a publicly traded company, was organized on January 1, 2018. It is authorized to issue an unlimited number of $ 3 noncumulative preferred shares and an unlimited number of common shares. The following share transactions were completed during the company’s first year of operations:
Jan. | 10 | Issued 940,000 common shares for $ 2 per share. | |
Mar. | 1 | Issued 22,000 preferred shares for $ 50 per share. | |
May | 1 | Issued 235,000 common shares for $ 3 per share. | |
June | 1 | Reacquired and retired 10,000 common shares at $ 2 per share. Determine the average cost of each reacquired share to the nearest cent before recording this transaction. | |
July | 24 | Issued 32,100 common shares for $ 119,000 cash and used equipment. The equipment originally cost $ 31,000. It now has a carrying amount of $ 15,500 and a current value of $16,400. The common shares were trading for $4 per share on this date. | |
Sept. | 4 | Issued 9,000 common shares for $ 5 per share. | |
Nov. | 1 | Issued 3,600 preferred shares for $ 50 per share. | |
20 | Reacquired and retired 14,000 common shares at $ 4 per share. Determine the average cost of each reacquired share to the nearest cent before recording this transaction. | ||
Dec. | 14 | Declared a $ 72,000 cash dividend to the preferred shareholders, to shareholders of record on December 31, payable on January 10. | |
31 | Reported net income of $ 1,320,000 for the year. |
Partially correct answer iconYour answer is partially correct.
Record the above transactions for 2018, including any required
entries to close dividends declared and net income.
(Credit account titles are automatically indented when
the amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter 0 for
the amounts. Round average cost per share to 2 decimal palces, e.g.
2.25 and final answers to 0 decimal places.)
Transaction entries:
Date |
Account Titles and Explanation |
Debit |
Credit |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31 |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31 |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31 |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31 |
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July 24 |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31 |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31 |
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Nov. 20 |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31 |
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Closing entries:
Date |
Account Titles and Explanation |
Debit |
Credit |
Dec. 31 |
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(To close cash dividends) |
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Dec. 31 |
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(To close profit) |
Link to eBook Materials
List of Accounts
Incorrect answer iconYour answer is incorrect.
Open T accounts and post to the shareholders’ equity accounts. (Record entries in the order presented in the problem.)
Preferred Shares | |||
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Common Shares | |||
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Contributed Surplus | |||
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Dividends Declared | |||
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Retained Earnings | |||
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
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Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31Dec. 31 Bal.Dec. 31 CE |
Link to eBook Materials
List of Accounts
Partially correct answer iconYour answer is partially correct.
Prepare the shareholders’ equity section of the statement of financial position at December 31. (Enter account name only and do not provide descriptive information.)
VERMILLION
CORPORATION Statement of Financial Position (Partial) December 31, 2018For the Quarter Ended December 31, 2018For the Year Ended December 31, 2018 |
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Cash DividendsShare CapitalShareholders' EquityTotal Share CapitalTotal Shareholders' Equity |
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Cash DividendsShare CapitalShareholders' EquityTotal Share CapitalTotal Shareholders' Equity |
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$ | ||
Cash DividendsShare CapitalShareholders' EquityTotal Share CapitalTotal Shareholders' Equity |
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Cash DividendsShare CapitalShareholders' EquityTotal Share CapitalTotal Shareholders' Equity |
$ |
A | B | C | D | E | F | G | H |
2 | |||||||
3 | Journal entries will be as follows: | ||||||
4 | |||||||
5 | Date | Account | Debit | Credit | |||
6 | 10-Jan | Cash (940000*$2) | $1,880,000 | ||||
7 | Common Stock | $1,880,000 | |||||
8 | |||||||
9 | 1-Mar | Cash (22,000*$50) | $1,100,000 | ||||
10 | Preferred Stock | $1,100,000 | |||||
11 | |||||||
12 | 1-May | Cash (235,000*$3) | $705,000 | ||||
13 | Common Stock | $705,000 | |||||
14 | |||||||
15 | Total Value of Common Stock | $2,585,000 | |||||
16 | Total Number of Common Stock | 1,175,000 | |||||
17 | |||||||
18 | Average cost of reacquired share | $2.20 | |||||
19 | |||||||
20 | Journal entry to reacquire the common stock: | ||||||
21 | Date | Account | Debit | Credit | |||
22 | 1-Jun | Treasury Stock (10,000*$2) | $20,000 | ||||
23 | Cash | $20,000 | |||||
24 | |||||||
25 | Journal Entry to retire common stock: | ||||||
26 | Date | Account | Debit | Credit | |||
27 | 1-Jun | Common Stock (10,000*$2.20) | $22,000 | ||||
28 | Treasury Stock | $20,000 | |||||
29 | Retained Earnings | $2,000 | |||||
30 | |||||||
31 | Journal entry to issue common shares | ||||||
32 | Date | Account | Debit | Credit | |||
33 | 24-Jun | Cash | $119,000 | ||||
34 | Equipment | $31,000 | |||||
35 | Accumulated Depreciation | $15,500 | |||||
36 | Common Stock | $134,500 | |||||
37 | |||||||
38 | Date | Account | Debit | Credit | |||
39 | 4-Sep | Cash (9000*$5) | $45,000 | ||||
40 | Common Stock | $45,000 | |||||
41 | |||||||
42 | 1-Nov | Cash (3600*$50) | $180,000 | ||||
43 | Preferred Stock | $180,000 | |||||
44 | |||||||
45 | Total Value of Common Stock | $2,742,500 | |||||
46 | Total Number of Common Stock | 1,206,100 | |||||
47 | |||||||
48 | Average cost of reacquired share | $2.27 | |||||
49 | |||||||
50 | Journal entry to reacquire the common stock: | ||||||
51 | Date | Account | Debit | Credit | |||
52 | 1-Nov | Treasury Stock (14,000*$4) | $56,000 | ||||
53 | Cash | $56,000 | |||||
54 | |||||||
55 | Journal Entry to retire common stock: | ||||||
56 | Date | Account | Debit | Credit | |||
57 | 20-Nov | Common Stock (14,000*$2.27) | $31,834 | ||||
58 | Retained Earnings | $24,166 | |||||
59 | Treasury Stock | $56,000 | |||||
60 | |||||||
61 | Journal entry for cash dividends to preferred shareholders: | ||||||
62 | Date | Account | Debit | Credit | |||
63 | 14-Dec | Preferred Dividends | $72,000 | ||||
64 | Preferred Dividends Payable | $72,000 | |||||
65 | |||||||
66 | Closing entry for cash dividends | ||||||
67 | Date | Account | Debit | Credit | |||
68 | 31-Dec | Retained Earnings | $72,000 | ||||
69 | Preferred Dividends | $72,000 | |||||
70 | |||||||
71 | Closing entry for net income | ||||||
72 | Date | Account | Debit | Credit | |||
73 | 14-Dec | Net Income | $1,320,000 | ||||
74 | Retained Earnings | $1,320,000 | |||||
75 |
Formula sheet
A | B | C | D | E | F | G | H |
2 | |||||||
3 | Journal entries will be as follows: | ||||||
4 | |||||||
5 | Date | Account | Debit | Credit | |||
6 | 43110 | Cash (940000*$2) | =940000*2 | ||||
7 | Common Stock | =E6 | |||||
8 | |||||||
9 | 43160 | Cash (22,000*$50) | =22000*50 | ||||
10 | Preferred Stock | =E9 | |||||
11 | |||||||
12 | 43221 | Cash (235,000*$3) | =235000*3 | ||||
13 | Common Stock | =E12 | |||||
14 | |||||||
15 | Total Value of Common Stock | =F7+F13 | |||||
16 | Total Number of Common Stock | =940000+235000 | |||||
17 | |||||||
18 | Average cost of reacquired share | =E15/E16 | |||||
19 | |||||||
20 | Journal entry to reacquire the common stock: | ||||||
21 | Date | Account | Debit | Credit | |||
22 | 43252 | Treasury Stock (10,000*$2) | =10000*2 | ||||
23 | Cash | =E22 | |||||
24 | |||||||
25 | Journal Entry to retire common stock: | ||||||
26 | Date | Account | Debit | Credit | |||
27 | 43252 | Common Stock (10,000*$2.20) | =10000*E18 | ||||
28 | Treasury Stock | =E22 | |||||
29 | Retained Earnings | =E27-F28 | |||||
30 | |||||||
31 | Journal entry to issue common shares | ||||||
32 | Date | Account | Debit | Credit | |||
33 | 43275 | Cash | 119000 | ||||
34 | Equipment | 31000 | |||||
35 | Accumulated Depreciation | =E34-15500 | |||||
36 | Common Stock | =E33+E34-F35 | |||||
37 | |||||||
38 | Date | Account | Debit | Credit | |||
39 | 43347 | Cash (9000*$5) | =9000*5 | ||||
40 | Common Stock | =E39 | |||||
41 | |||||||
42 | 43405 | Cash (3600*$50) | =3600*50 | ||||
43 | Preferred Stock | =E42 | |||||
44 | |||||||
45 | Total Value of Common Stock | =E15-E27+F36+F40 | |||||
46 | Total Number of Common Stock | =940000+235000-10000+32100+9000 | |||||
47 | |||||||
48 | Average cost of reacquired share | =E45/E46 | |||||
49 | |||||||
50 | Journal entry to reacquire the common stock: | ||||||
51 | Date | Account | Debit | Credit | |||
52 | 43405 | Treasury Stock (14,000*$4) | =14000*4 | ||||
53 | Cash | =E52 | |||||
54 | |||||||
55 | Journal Entry to retire common stock: | ||||||
56 | Date | Account | Debit | Credit | |||
57 | 43424 | Common Stock (14,000*$2.27) | =14000*E48 | ||||
58 | Retained Earnings | =F59-E57 | |||||
59 | Treasury Stock | =E52 | |||||
60 | |||||||
61 | Journal entry for cash dividends to preferred shareholders: | ||||||
62 | Date | Account | Debit | Credit | |||
63 | 43448 | Preferred Dividends | 72000 | ||||
64 | Preferred Dividends Payable | =E63 | |||||
65 | |||||||
66 | Closing entry for cash dividends | ||||||
67 | Date | Account | Debit | Credit | |||
68 | 43465 | Retained Earnings | 72000 | ||||
69 | Preferred Dividends | =E68 | |||||
70 | |||||||
71 | Closing entry for net income | ||||||
72 | Date | Account | Debit | Credit | |||
73 | 43448 | Net Income | 1320000 | ||||
74 | Retained Earnings | =E73 | |||||
75 |