After the books have been closed, the ledger of Suki Corporation at December 31, 2014, contains the following shareholders’ equity accounts:
Preferred Shares (10,000 shares issued) ......... $1,100,000
Common Shares (400,000 shares issued) ......... 1,850,000
Contributed Capital—purchase of common shares .... 10,000
Common Stock dividend distributable ......... 110,000
Retained Earnings .................. 2,390,000
A review of the accounting records reveals the following:
a. Both the common and preferred shares have no par value and unlimited number of shares authorized.
b. The preferred shares are noncumulative with an $11 dividend. The 10,000 shares were issued on January 15, 2012. No dividend was paid to the preferred shareholders in 2012 or 2013.
c. The January 1 balance in Retained Earnings was $ 2,250,000.
d. On January 15, the firm purchased 20,000 common shares for $4 cash per share and cancelled these shares.
e. On October 1, 100,000 common shares were sold for cash at $5 per share.
f. A cash dividend of $650,000 was declared and properly allocated to Preferred Shares and Common Shares on November 1.
g. On December 31, a 5% stock dividend was declared for common shares.
1. Calculate the allocation of the cash dividend to preferred and common shareholders.
2. Calculate (a) the initial common share issuing price per share, (b) the net income, and (c) market price for the common shares on December 31.
3. Prepare all necessary journal entries for Suki Corporation in 2014.
4 Prepare a statement of shareholders’ equity for the year ended December 31, 2014.