Kelly Incorporated was issued a charter on January 15, 2014, that authorized the following share capital:
Common shares, no par value, 100,000 shares.
Preferred shares, $ 1.50, no par value, 5,000 shares. $ 1.50 is the dividend rate.
During 2014, the following selected transactions occurred:
a. Issued 20,000 common shares at $ 18 cash per share.
b. Issued 3,000 preferred shares at $ 25 cash per share.
At the end of 2014, the company’s net earnings equalled $ 40,000.
1. Prepare the shareholders’ equity section of the statement of financial position at December 31, 2014.
2. Assume that you are a common shareholder. If Kelly needed additional capital, would you prefer to have it issue additional common or preferred shares? Explain.