Burlington Clothes was incorporated on October 1, 2014. The articles of incorporation indicated the company was authorized
Question:
Burlington Clothes was incorporated on October 1, 2014. The articles of incorporation indicated the company was authorized to issue 600,000 shares of no par value common shares and 200,000, $2 preferred shares that are cumulative and participating in distributions in excess of 5% of a dividend rate on the common shares. The company’s year-end is September 30. The following information relates to the company’s shareholders’ equity account.
(1) 80,000 common shares issued for cash on October 1, 2014, at $60 per share.
(2) 20,000 $2 preferred shares were issued on October 1, 2014 at $80 per share.
(3) 10,000 common shares exchanged on Dec 15, 2014, for land in the downtown core. The land had originally cost the seller $300,000 and had an estimated fair value of $550,000 on Dec 15, 2014 when Burlington’s share were selling for $58.
(4) 10,000 common shares issued on June 1, 2015 at $55 per share.
(5) October 1, 2014: subscriptions were received for 8,000 common shares at $60 per share. The first installment of $200,000 was received on this date and the final installment was paid on September 30, 2017.
(6) November 1, 2016: the company purchased 4,000 of its common shares at $58 per share and restored these shares to the status of authorized but unissued.
(7) December 1, 2016: the company declared a 5% stock dividend for shareholders of record on January 1, 2017. The company was short on cash and therefore could not pay a cash dividend. The company’s shares were selling at $57 per share on December 1, 2016.
(8) March 15, 2017: the company sold 10000 common shares for $450,000.
(9) Dividends: Burlington did not declare any dividends until September 30, 2016. At that date total dividends of $500,000 were declared.
(10) The company incurred the following profits (loss) since incorporation:
2015. . . . . . . . . . . . (25,000)
2016. . . . . . . . . . . . 675,000
2017. . . . . . . . . . . . 400,000
Required:
a. Determine the amount of dividends received by preferred and common shareholders from the September 30, 2016 declaration.
b. Prepare the journal entries for 2016-17 fiscal year.
c. Prepare the statement of changes in equity and the shareholders’ equity section of the balance sheet for September 30, 2017.
Horngrens Accounting
ISBN: 978-0133855388
10th Canadian edition Volume 2
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo-Ann L. Johnston, Peter R. Norwood