Question

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Vermillion Corporation, a publicly traded company, was organized on January 1, 2018. It is authorized to...

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

  Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31

  Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31

  Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31

July 24

  Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31

  Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31

Nov. 20

  Jan. 10Mar. 1May 1June 1July 24Sept. 4Nov. 1Nov. 20Dec. 14Dec. 31


Closing entries:

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

(To close cash dividends)

Dec. 31

(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

  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

  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

  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

  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

  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

  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

  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

  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

  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

  Cash DividendsShare CapitalShareholders' EquityTotal Share CapitalTotal Shareholders' Equity

  Cash DividendsShare CapitalShareholders' EquityTotal Share CapitalTotal Shareholders' Equity

$

  Cash DividendsShare CapitalShareholders' EquityTotal Share CapitalTotal Shareholders' Equity

  Cash DividendsShare CapitalShareholders' EquityTotal Share CapitalTotal Shareholders' Equity

$

Solutions

Expert Solution

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

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