Some of the account balances of Vos Limited at December 31, 2022, are as follows:

The price of the company’s common shares has been increasing steadily on the market; it was $21 on January 1, 2023, and advanced to $24 by July 1 and to $27 at the end of 2023. The preferred shares are not openly traded but were appraised at $120 per share during 2023. Vos follows IFRS and had net income of $154,000 during 2023.

Instructions

a. Prepare the journal entries for each of the following. For the purpose of this question, ignore any dividend entitlement to the preferred shareholders.

1. The company declared a property dividend on April 1. Each common shareholder was to receive one share of Waterloo Corp. for every 10 shares outstanding. Vos had 8,000 shares of Waterloo (2% of the outstanding shares), which it had purchased in 2018 for $68,400. The shares areaccounted for using the FV-OCI model. The accumulated other comprehensive income relates only to these shares. The fair value of the Waterloo shares was $16 per share on April 1. The property dividend was distributed on April 21 when the fair value of the Waterloo shares was $18.50. The Waterloo shares remained at a fair value of $18.50 until year end.

2. On July 1, the company declared a 5% stock dividend at the fair value of the shares to the remaining common shareholders. The stock dividend was distributed July 22.

3. A shareholder, in an effort to persuade Vos to expand into her city, donated to the company a plot of land with an appraised value of $42,000.

b. Prepare the shareholders’ equity section of Vos’s SFP at December 31, 2023.

c. How should Vos account for the difference in fair value of the Waterloo shares between the date of declaration and date of distribution? Does the declaration of a property dividend create a financial liability?

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$6 Preferred shares (2,000 shares authorized, 2,000 shares issued and outstanding) Common shares (unlimited authorized, 50,000 shares issued and outstanding) Contributed surplus Retained earnings Accumulated other comprehensive income $520,000 500,000 103,000 774,000 22,350