Reference no: EM132783721

Post Company trades its' shares on the TSX and follows IFRS. At the beginning of the current fiscal year, the Shareholders' Equity section of the Statement of Financial Position was as follows:

Preferred Shares, 1%, cumulative, 500,000 shares authorized,

400,000 shares issued and outstanding $ 880,000

Common Shares, 1,000,000 shares authorized, 300,000

Issued and outstanding. 3,600,000

Retained earnings 570,000

Problem 1) Prepare journal entries for the following transaction for Post Company for the current year.

a. During the current year, Post granted stock options for 5,000 common shares to company executives. The company determined that each option is worth $10. The options expire at the year end and were considered part of the compensation for the current year. The exercise price is $30.

b. Post sold a $200,000, 10% bond issue at par. The company also issued one detachable stock purchase warrant with each $100 bond, which provided for the purchase of common shares at $30 per share. Similar bonds without the warrants were selling at 96 shortly after the issue and the warrants at $8.

c. The shareholders of Post Company received 100,000 rights: one share could be purchased for 10 rights at $32. The rights expire after 30 days. The market price of the shares at this time was $34 per share.

d. 4,000 of the shares relating to the stock options in A were exercised by the year end.

e. At the end of the year, 80% of the warrants in B had been exercised and the remaining were outstanding and in good standing.

f. All but 10,000 of the rights issued in C were exercised within the expiry period.

Problem  2) Prepare the Shareholders' Equity section of the Statement of Financial Position at the end of the current year. Retained Earnings balance at the end of the year is $750.000.