The equity section of Martino Inc. at the beginning of the current year appears below.

Share capital—ordinary, €10 par value, authorized 1,000,000

shares, 300,000 shares issued and outstanding .......................€3,000,000

Share premium—ordinary ............................................................600,000

Retained earnings .........................................................................570,000

During the current year, the following transactions occurred.

1. The company issued to the shareholders 100,000 rights. Ten rights are needed to buy one share at €32. The rights were void after 30 days. The market price of the shares at this time was €34 per share.

2. The company sold to the public a €200,000, 10% bond issue at 104. The company also issued with each €100 bond one detachable share purchase warrant, which provided for the purchase of ordinary shares at €30 per share. The net present value of the bonds without the warrants was €192,000.

3. All but 5,000 of the rights issued in (1) were exercised in 30 days.

4. At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing.

5. During the current year, the company granted share options for 10,000 ordinary shares to company executives. The company using a fair value option-pricing model determines that each option is worth €10. The option price is €30. The options were to expire at year-end and were considered compensation for the current year.

6. All but 1,000 shares related to the share-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract.

Instructions

(a) Prepare general journal entries for the current year to record the transactions listed above.

(b) Prepare the equity section of the statement of financial position at the end of the current year. Assume that retained earnings at the end of the current year is €750,000.