Chapter 6
Corporations: Contributed Capital and Dividends
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c) Prepare the shareholders’ equity section of the balance sheet as at December 31, 2016.
AP-18B
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Ping Pong Inc. began operations on January 1, 2015. The following transactions relating to
shareholders’ equity occurred in 2015, the first year of the company’s operations.
Jan 1 The corporate charter authorized the issuance of unlimited common shares and
200,000, $3 non-cumulative preferred shares worth $100 each.
Jan 2 Issued 400,000 common shares for $11 per share.
Jan 3 Issued 200,000 common shares in exchange for a building valued at $750,000 and
inventory valued at $320,000.
Jan 4 Instead of paying a $40,000 fee in cash, the company offered the accountant 400,
$3 preferred shares.
Jan 5 Issued 15,000, $3 preferred shares for $100 cash per share.
For the year ended December 31, 2015, the newly incorporated company had a net income of
$950,000. At the directors’meeting on January 15, 2016, the company decided to pay out 20%
of net income as cash dividends to preferred and common shareholders. The date of record
of the dividends is January 30, 2016. The company uses the cash dividend method to record
cash dividends.
The dividend payment date is February 29, 2016. During the period January 1–February 29,
2016, the company had a net income of $160,000.
