Reference no: EM132472650
Problem - The balance sheet for Tactex Controls Inc., provincially incorporated in 2018, reported the following components of equity on December 31, 2019.
Tactex Controls Inc. Equity Section of the Balance Sheet December 31, 2019
Contributed capital: Preferred shares, $2.0 cumulative, unlimited shares authorized; 28,000 shares issued and outstanding $400,000
Common shares, unlimited shares authorized; 83,000 shares issued and outstanding 743,000
Total contributed capital $1,143,000
Retained earnings 386,000
Total equity $1,529,000
In 2020 and 2021, the company had the following transactions affecting shareholders and the equity accounts:
2020 -
Jan. 1 Sold 38,000 common shares at $11.44 per share.
Jan. 5 The directors declared a total cash dividend of $239,000 payable on Feb. 28 to the Feb. 5 shareholders of record. Dividends had not been declared for the years 2018 and 2019. All of the preferred shares had been issued during 2018.
Feb. 28 Paid the dividends declared on January 5.
July 1 Sold preferred shares for a total of $155,000. The average issue price was $25 per share.
Dec. 31 Closed the dividend accounts along with the $577,600 credit balance in the Income Summary account.
2021 -
Sept. 5 The directors declared the required cash dividend on the preferred shares and a $2.2 per common share cash dividend payable on October 28 to the October 5 shareholders of record.
Oct. 28 Paid the dividends declared on September 5.
Dec. 31 Closed the Cash Dividends account along with the $544,000 credit balance in the Income Summary account.
Required -
1. Prepare journal entries to record the transactions and closings for 2020 and 2021. The company uses a cash dividends account to record declared dividends.
i. Jan 1 2020. Record the issuance of 38,000 common shares
ii. Jan 5 2020. Record the dividend declared on preferred shares and common shares.
iii. Feb 28 2020. Record cash dividend paid.
iv. Jul 1 2020. Record the issuance of preferred shares.
v. Dec 31 2020. Record to close the dividend account.
vi. Dec 31 2020. Record to close the profit to retained earnings.
vii. Sep 5 2021. Record the dividend declared on preferred shares and common shares.
viii. Oct 28 2021. Record cash dividend paid.
ix. Dec 31 2021. Record to close the cash dividends account.
x. Dec 31. 2021. Record to close the income summary account.
2. Prepare a statement of changes in equity for the year ended December 31, 2021.
3. Prepare the equity section of the company's balance sheet as of December 31, 2021.