Hammond Manufacturing Inc. was legally incorporated on January 2, 2020. Its articles of incorporation granted it the
Question:
Hammond Manufacturing Inc. was legally incorporated on January 2, 2020. Its articles of incorporation granted it the right to issue an unlimited number of common shares and 100,000 shares of $14.5 non-cumulative preferred shares. The following transactions are among those that occurred during the first three years of operations:
2020 | |||
Jan. | 12 | Issued 40,050 common shares at $4.9 each. | |
20 | Issued 7,000 common shares to promoters who provided legal services that helped to establish the company. These services had a fair value of $37,000. | ||
31 | Issued 81,000 common shares in exchange for land, building, and equipment, which have fair market values of $361,000, $481,000, and $49,000, respectively. | ||
Mar. | 4 | Purchased equipment at a cost of $8,170 cash. This was thought to be a special bargain price. It was felt that at least $10,900 would normally have had to be paid to acquire this equipment. | |
Dec. | 31 | During 2020, the company incurred a loss of $97,000. The Income Summary account was closed. | |
2021 | |||
Jan. | 4 | Issued 6,000 preferred shares at $73 per share. | |
Dec. | 31 | The Income Summary account was closed. Profit for 2021 was $217,000. | |
2022 | |||
Dec. | 4 | The company declared a cash dividend of $0.22 per share on the common shares payable on December 18 and also declared the required dividend on the preferred shares. | |
18 | Paid the dividends declared on December 4. | ||
31 | Profit for the year ended December 31, 2022, was $196,245. The Income Summary account was closed. |
Required:
1.Journalize the transactions for the years 2020, 2021, and 2022. The company does not use a cash dividends account.
2.Prepare the statement of changes in equity for the year ended December 31, 2022.(Amounts to be deducted should be indicated by a minus sign.)
3.Prepare the equity section on the December 31, 2022, balance sheet.
Analysis Component:
Determine the net assets of Hammond Manufacturing Inc. for 2020, 2021, and 2022.Is the trend favourable or unfavourable?
Fundamental Accounting Principles Volume II
ISBN: 978-1259066511
14th Canadian Edition
Authors: Larson Kermit, Jensen Tilly