The shareholder equity section of Prairie Inc.’s statement of financial position as at December 31st, 2021 was as follows: Contributed capital: Preferred shares: $3.00, cumulative, fully participating, 1,000,000 authorized, 200,000 issued and outstanding $6,500,000 Common shares, unlimited authorization, 400,000 shares issued and outstanding 7,500,000 Total contributed capital $14,000,000 Contributed surplus (common share buyback) $110,000 Retained earnings $9,000,000 Total shareholders’ equity $24,110,000

In 2022, the following transactions took place:

January 15th	The company issued 30,000 common shares for $30.00 per share. All were paid for in cash.
February 28th	The company acquired a parcel of land by paying $100,000 and issuing 12,000 common shares. The fair value of the land acquired was $400,000.
May 31st	The company bought back 18,000 common shares. The market value of the shares on May 31st was $32.00
September 1st	The company declared and issued a 4% stock dividend. The market value of the company’s common shares was $35.00 on September 1st.
December 31st	The company reported net income for the year as $2,000,000
December 31st	The board of directors wants to pay out dividends to the preferred and common shareholders and have created a total dividend pool of $2,242,500. The preferred share dividends were not paid in 2021 but had been paid in all years prior to that.

Required:

1. Prepare all necessary journal entries to record the above-listed transactions for 2022.

2. Determine the amount of the dividend pool that would be distributed to the preferred shareholders and to the common shareholders. Prepare the journal entry to record the dividend declaration assuming the dividend will be declared on December 31, 2022, and paid on January 31, 2023.

3. Provide the balances on December 31^st, 2022 for the following accounts:

   1. Preferred shares

   2. Common shares

   3. Contributed surplus

   4. Retained earnings

Answer rating: 100% (QA)

Part 1 and 3 Journal Entry Date Account Title Explanation 2022 15Jan Cash C... View the full answer