Reference no: EM132495132

Point 1: As of December 31, 2015, Donnelly Corporation had 350,000 common shares authorized, 250,000 of which had been issued for proceeds of $2.5 million. The Retained Earnings balance was $1,200,000.

Point 2: On January 18, 2016, 40,000 common shares were issued at $20 per share. Profit for 2016 was $180,000. No dividends were declared in 2016.

Question 1: The balances in the shareholders' equity section of the statement of financial position at December 31, 2016 will be:

Option 1: Retained earnings $1,020,000; Common shares issued $3,300,000

Option 2: Retained earnings $1,380,000; Common shares issued $3,300,000

Option 3: Retained earnings $1,380,000; Common shares issued $290,000

Option 4: Retained earnings $1,380,000; Common shares issued $2,580,000

Option 5: None of the above