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Homework answers / question archive / The All-Well Corporation had equity on December 31, 2019, as follows: Common shares, unlimited shares authorized, 25,000 shares issued $125,000 Retained earnings 150,000 All-Well Corporation is authorized to issue 50,000 shares of $2 cumulative preferred shares
The All-Well Corporation had equity on December 31, 2019, as follows: Common shares, unlimited shares authorized, 25,000 shares issued $125,000 Retained earnings 150,000 All-Well Corporation is authorized to issue 50,000 shares of $2 cumulative preferred shares. The following transactions occurred during 2020: Jan. 10 Issued 10,000 common shares in exchange for land valued at $60,000. Feb. 15 The board of directors declared a 5% share dividend to shareholders of record on March 1, to be distributed on March 20. The shares were selling for $6 a share. Mar. 20 Issued the share dividend. Apr. 1 Issued 10,000 preferred shares for cash at $11 per share. May 1 Declared total cash dividends of $62,000 to shareholders of record on May 20, payable May 31. May 31 Paid the cash dividend. June 15 The board decided to split the common shares 4 for 1 effective July 1. July 1 Share split (4 for 1) executed. Dec. 31 Earned a net income of $250,000 for the year. Closed the income summary account. REQUIRED: 1) Journalize the above journal entries. 2) Prepare a statement of changes in equity for 2020. 3) Prepare the balance sheet presentation of the equity as at December 31, 2020.
| 1) | ||||
| Date | Account Titles and Explanation | Debit | Credit | |
| Jan.10 | Land | $ 60,000.00 | ||
| Common stock | $ 60,000.00 | |||
| Feb.15 | Retained Earnings =(25000+10000)x 5% x $6 | $ 10,500.00 | ||
| Common stock dividend Distributable | $ 10,500.00 | |||
| Mar.20 | Common stock dividend Distributable | $ 10,500.00 | ||
| Common stock | $ 10,500.00 | |||
| Apr. 1 | Cash (10000 x $11) | $ 110,000.00 | ||
| Preferred Stock | $ 110,000.00 | |||
| May.1 | Retained Earnings | $ 62,000.00 | ||
| Common Stock Dividend Payable (balancing) | $ 42,000.00 | |||
| Preferred Stock Dividend Payable (10000 x 2) | $ 20,000.00 | |||
| May.31 | Common Stock Dividend Payable | $ 42,000.00 | ||
| Preferred Stock Dividend Payable | $ 20,000.00 | |||
| Cash | ||||
| 15-Jun | No entry | |||
| 1-Jul | No entry | |||
| 31-Dec | Income Summary | $ 250,000.00 | ||
| Retained Earnings | $ 250,000.00 | |||
| 2) | Statement of Changes in Equity | |||
| Preferred Stock | Common stock | Retained Earnings | Total | |
| Balance | $125,000 | $150,000 | $275,000 | |
| Issued Common Stock | $60,000 | $60,000 | ||
| Stock Dividend | $10,500 | -$10,500 | $0 | |
| Issued Preferred Stock | $110,000 | $110,000 | ||
| Dividend Paid | -$62,000 | -$62,000 | ||
| Net Income | $250,000 | $250,000 | ||
| Total | $110,000 | $195,500 | $327,500 | $633,000 |
| 3) | All- Well Corporation | |||
| Balance Sheet | ||||
| Dec. 31,2020 | ||||
| Shareholder equity | ||||
| Preferred Stock | $110,000 | |||
| Common stock | $195,500 | |||
| Retained Earnings | $327,500 | |||
| Total | $633,000 |
