Ozabal Inc., a private company, is authorized to issue an unlimited number of common shares and 100,000 noncumulative $4 preferred shares. It began operations on January 1, 2014, and the following are selected transactions during 2014:
Jan. 1 Issued 300,000 common shares for $150,000 cash.
2 Issued 30,000 preferred shares for $40 cash per share.
Dec. 1 Declared a total of $225,000 in dividends, payable on January 5, to shareholders of record on December 13.
31 Determined that it had total revenues of $915,000 and operating expenses of $610,000.
Ozabal elected to report under ASPE. It has a 15% income tax rate and did not pay income tax instalments during the year.
Instructions
(a) Record the share issue and dividend transactions.
(b) Prepare a partial income statement starting with profit before income taxes and record an adjusting entry for income tax.
(c) Prepare a statement of retained earnings and the shareholders' equity section of the balance sheet.