Question

Flint’s Dance Studios Ltd. is a public company, and accordingly uses IFRS for financial reporting. The corporate charter authorizes the issuance of an unlimited number of common shares and 70,000 preferred shares with a $2 dividend. At the beginning of the December 31, 2020 year, the opening account balances indicated that 30,000 common shares had been issued for $5 per share, and no preferred shares had been issued. Opening retained earnings were $311,000. The transactions during the year were as follows:

Jan. 15 Issued 12,000 common shares at $6 per share.

Feb. 12 Issued 2,300 preferred shares at $56 per share.

Sept. 2 Issued 5,000 common shares in exchange for land valued at $30,000.

Oct. 31 Declared and paid a dividend on preferred shares of $2 per share.

Nov. 1 Declared and paid a dividend on common shares of $1.20 per share.

Nov. 15 Purchased and retired 500 preferred shares at $58 per share.

Dec. 31 After preliminary closing entries, the Income Summary account had a credit balance of $224,000.

a. Prepare journal entries to record the transactions above.
b. Prepare the statement of changes in shareholders’ equity.
c. Prepare the closing entries for the income summary and dividends at December 31, 2020.

Answer 1

Part -3 preparation of closing entries.