Reference no: EM132478506

British Columbia Corporation (BCC) had an Initial Public Offering incorporated on January 1, 2018 with the following chronological equity related events.

Required:

Question 1: Prepare entries, with all supporting computations, for the following events. Please round dollar amounts to two decimal places. Assume there will be income generated to provide sufficient retained earnings to absorb any dividends or other charges to retained earnings in the current year.

January 1:

The Articles of Incorporation state that BCC is authorized to issue unlimited million common shares and 250,000 preferred shares. Preferred shares have preference to cash dividends only as follows; they are cumulative, $.40 annual entitlement and participate fully after common shares have been awarded $.50 per share, applied on an annual basis. If activated, the preferred share participation is based on the relative dividend payout ratio (ratio to one decimal point). BCC is incorporated in a province that permitted Treasury share transactions.

January 2:

As an incentive to locate part of its operations in a particularly economically depressed town, the municipality gave BCC vacant industrial land which had a cost of $40,000 to the municipality several years ago but had a fair value at the time of title transfer of $215,000; all attributable to the common shareholder group.

January 10:

500,000 common shares were issued by the underwriter for $39.00 per share. Total issue costs; securities lawyers, underwriters fees, accountants, share printing were $500,000 of the gross share capital proceeds.

January 15:

200,000 preferred shares were issued for $42.00 per share.

January 20:

60,000 common shares were sold by subscription to 500 subscribers who will purchase 120 shares each at a subscription price of $50 per share. 20% of the subscription, in cash, accompanied the contract and the balance was due on December 15, 2018.

May 1:

20,000 preferred shares were repurchased from the open market for $43.50 per share and were retired.

May 28:

BCC acquired specialized machinery by issuing 20,000 preferred shares when the preferred shares were trading at a five day average of $48.50 per share and the fair value of the equipment was reliably determined to be $960,000. The company values shares issued in acquiring assets as prescribed under IFRS 2. (Hint: Google "IFRS 2" and all will be revealed!)

June 13:

BCC repurchased and retired 50,000 common shares at a purchase cost of $43 per share.

July 5:

BCC went to the open market and purchased 15,000 common shares at $52 which it designated as being held in Treasury

August 12:

The company declared a 2% stock dividend on common shares outstanding at this date, to be distributed on August 31, valued at $40 per share. The issue resulted in fractional share rights for the equivalent of 200 shares. The company bylaws permitted stock dividends on common shares are not pre-empted by preferred share dividend entitlements.

August 31:

Shares were issued under the common share dividend declaration. 1/2 of the fractional share rights were exercised; the remainder lapsed

December 10:

BCC re-sold to the open market 5,000 of the shares it was holding in treasury for proceeds of $50 per share

December 15:

All but 5 subscribers to the share subscription contracts entered into on January 20 paid in full at this date and the shares were issued. According to the contract, the defaulting subscribers would lose all deposits.

December 15:

BCC had purchased 50,000 shares during the year of Westcoast Realty Limited (WRL) for a total purchase price of $300,000 (account: Investments in equities) appropriately accounted for and this entry need not be made in your answer. This purchase did not constitute either significant influence or control over WRL and BCC has not adopted fair valuation of financial instruments. On December 15, when WRL shares were trading at $9.50 per share and as provided in the Articles of Incorporation, BCC declared a property dividend of all WRL shares distributable to the preferred shareholders only of BCC. The WRL shares will be distributed on January 15, 2019.

December 20:

BCC declared $400,000 in cash dividends, to be distributed in accordance with the share class entitlements. (Round to nearest dollar in determining distribution; no cents; any %s to one decimal place); no multiple entries