On January 1, 2024, Schipper Ltd. had the following shareholders’ equity accounts: 

Common shares (1,000,000 issued) ..............................................$1,500,000 

Retained earnings ..............................................................................1,800,000 

The company was also authorized to issue an unlimited number of $4 noncumulative preferred shares. During 2024, the corporation had the following transactions and events related to its shareholders’ equity: 

Jan. 2 Issued 100,000 preferred shares for $50 per share. 

Mar. 31 Paid quarterly dividend to preferred shareholders. June 30 Paid quarterly dividend to preferred shareholders. 

Aug. 12 Issued 100,000 common shares for $1.70 per share. 

Sept.30 Paid quarterly dividend to preferred shareholders. 

Dec. 31 Paid quarterly dividend to preferred shareholders and a $0.25 per share dividend to the common shareholders. 

Dec. 31 Loss for the year was $100,000.

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, enter the beginning balances, and post the entries from part (a). 

c. Prepare the shareholders’ equity section of the balance sheet at December 31, 2024, including any required disclosures. Assume Schipper is reporting under ASPE.

Schipper incurred a loss in 2024. Are companies allowed to declare and pay dividends during a year when they have a loss?