Chapter 6
Corporations: Contributed Capital and Dividends
305
Required
a) Explain each journal entry.
b) Complete the following table showing the equity balances at each indicated date.
October 2 October 25 October 31 November 5
Common Shares
Stock Dividends Distributable
Retained Earnings
Total Equity
AP-16B (
4
6
)
Vitamin Corporation was incorporated and began operations on May 1, 2012. Vitamin
presented the following information at the end of the 2015 fiscal year.
Preferred Shares, $3 cumulative, 300,000 shares authorized, 5,000 shares issued and
outstanding
$14,500
Common Shares, unlimited authorized, 40,000 shares issued and outstanding
280,000
Retained Earnings
645,000
Dividends were last paid out in 2014 fiscal year. The following transactions relating to
shareholders’ equity occurred during the 2016 to 2017 fiscal year.
May 1 Issued 60,000 common shares for $8 per share and 15,000 preferred shares for $3
per share.
Jun 2 Issued 5,000 common shares in exchange for $30,000 in legal services provided by
Vitamin Corp.’s lawyer when setting up the corporation.
Aug 4 Issued 40,000 common shares in exchange for machinery valued at $250,000. The
fair value of the shares could not be readily determined.
Nov 15 Issued 10,000 common shares for $8.50 each and 5,000 preferred shares for $3.25
each.
Apr 30 Net income for the year was $97,200. Dividends of $165,000 were declared and are
payable on May 5, 2016. The company uses the cash dividends method to record
dividends.
