On January 1, 2014, Conway Ltd. had the following shareholders' equity accounts: Common shares, unlimited number of

Question:

On January 1, 2014, Conway Ltd. had the following shareholders' equity accounts:

Common shares, unlimited number of shares authorized, 1.5 million issued...........$1,650,000

Retained earnings...................................................................................400,000

It was also authorized to issue an unlimited number of $6 noncumulative preferred shares. During 2014, the corporation had the following transactions and events related to its shareholders' equity:

Jan. 2 Issued 100,000 preferred shares at $66 per share.

Mar. 31 Paid quarterly dividend to preferred shareholders.

Apr. 18 Issued 250,000 common shares at $1.30 per share.

June 30 Paid quarterly dividend to preferred shareholders.

Sept. 30 Paid quarterly dividend to preferred shareholders.

Dec. 31 Profit for the year was $160,000.

Instructions

(a) Journalize the transactions and the entries to close dividends and the Income Summary account.

(b) Open general ledger accounts for the shareholders' equity accounts and post transactions in (a).

(c) Prepare the shareholders' equity section of the balance sheet at December 31, 2014, including any required disclosures. Assume Conway reports under ASPE.

Taking It Further

What is required to declare dividends? What was the maximum amount of dividends Conway could have declared on the common shares at December 31, 2014?

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