The shareholders’ equity accounts of Cedeno Inc. at December 31, 2013, are as follows:

Common shares (unlimited number of shares authorized, 1,000,000 issued) ... $3,000,000

Stock dividends distributable …………………………………………………….…........................… 400,000

Contributed surplus—reacquired common shares ………………………………..…….............. 5,000

Retained earnings …………………………………............................……………………………..….. 1,200,000

Cedeno has a 30% income tax rate. During 2014, the following transactions and events occurred:

Jan. 20 Issued 100,000 common shares as a result of a 10% stock dividend declared on December 15, 2013. The shares’ fair value was $4 on December 15 and $5 on January 20.

Feb. 12 Issued 50,000 common shares for $5 per share.

Mar. 31 Corrected an error in the December 31, 2013, inventory that had overstated the cost of goods sold for 2013 by $60,000.

Nov. 2 Reacquired 25,000 shares for $2.50 each.

Dec. 31 Declared a cash dividend to the common shareholders of $0.50 per share to shareholders of record at January 15, payable January 31.

31 Determined that profit was $280,000.

31 Determined that other comprehensive loss was $28,000 before income tax. 

Instructions 

(a) Journalize the transactions and summary closing entries.

(b) Enter the beginning balances and post the entries in part (a) to the shareholders’ equity accounts. (Note: Open additional shareholders’ equity accounts as needed.)

(c) Prepare a statement of comprehensive income beginning with profit.

(d) Prepare a statement of changes in share holders’ equity.

(e) Prepare the share holders’ equity section of the balance sheet at December 31, 2014.

TAKING IT FURTHER

Explain the two methods of preparing a statement of comprehensive income. Is one method better than the other?