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				75				450				1,904				2,429
Sale of preferred shares	30							960								990
Sale of common shares				9				54								63
Cash dividend, preferred												(3	)			(3	)
Cash dividend, common												(19	)			(19	)
Net income												360				360
Balance at December 31, 2018	30			84				1,464				2,242				3,820
Retirement of shares				(4	)			(24	)			(20	)			(48	)
Cash dividend, preferred												(3	)			(3	)
Cash dividend, common												(23	)			(23	)
3-for-2 split effected in the form of a dividend	15							(15	)
Net income												510				510
Balance at December 31, 2019	45			80				1,425				2,706				4,256
Common stock dividend				7				47				(54	)
Cash dividend, preferred												(3	)			(3	)
Cash dividend, common												(25	)			(25	)
Net income												552				552
Balance at December 31, 2020	45			87				1,472				3,176				4,780

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

Answer 1

	JOURNAL ENTRY
	Year	Account Title	Debit	Credit
	2018	Cash	$990,000,000
		Preferred stock		$30,000,000	($10 per share)
		Additional paid in capital-Preferred stock		$960,000,000	($320 per share)
		(To record Issue of 3 million preferred shares at $330 per share)
	2018	Cash	$63,000,000
		Common Stock		$9,000,000	($1 per share)
		Additional paid in capital-Common Stock		$54,000,000	($6 per share)
		(To record issue of 9million common shares at $7 each)
	2018	Retained earnings	$3,000,000
		Cash		$3,000,000
		(To record payment of cash dividend of $1 per preferred share)
	2018	Retained earnings	$19,000,000
		Cash		$19,000,000
		(To record payment of cash dividend for common stock)
	2018	Net Income	$360,000,000
		Retained Earnings		$360,000,000
		(To transfer net income to retained earnings)
	2019	Common Stock	$4,000,000
		Additional Paid up Capital	$24,000,000
		Retained earnings	$20,000,000
		Cash		$48,000,000
		( To recordv retirement of 4 million common shares)
	2019	Retained earnings	$3,000,000
		Cash		$3,000,000
		(To record payment of cash dividend of $1 per preferred share)
	2019	Retained earnings	$23,000,000
		Cash		$23,000,000
		(To record payment of cash dividend for common stock)
	2019	Retained Earnings	$15,000,000
		Preferred stock		$15,000,000
		(To recordv 3 for 2 split effected in the form of dividend)
	2019	Net Income	$510,000,000
		Retained Earnings		$510,000,000
		(To transfer net income to retained earnings)
	2020	Retained earnings	$54,000,000
		Common Stock		$7,000,000
		Additional Paid in Capital		$47,000,000
		(To record stock dividend on Common Shares)
	2020	Retained earnings	$3,000,000
		Cash		$3,000,000
		(To record payment of cash dividend of $1 per preferred share)
	2020	Retained earnings	$25,000,000
		Cash		$25,000,000
		(To record payment of cash dividend for common stock)
	2020	Net Income	$552,000
		Retained Earnings		$552,000
		(To transfer net income to retained earnings)
		SHAREHOLDERS EQUITY SECTION
			.Dec31, 2010	.Dec31,2019
		Preferred Stock,$10 par Value,4,500,000shares authorised issued and outstanding	$45,000,000	$45,000,000
		Common stock, $1 par value 87,000,000shares issued ands outstanding	$87,000,000	$80,000,000
		Additional paid in capital	$1,472,000,000	$1,425,000,000
		Retained earnings	$3,176,000,000	$2,706,000,000
		Total stockholders equity	$4,780,000,000	$4,256,000,000