Eastwood Inc. had the following shares authorized in its articles of incorporati

Question

Eastwood Inc. had the following shares authorized in its articles of incorporation and issued on December 31, 2015: 100,000 preferred shares, no par, $4 semi-annual dividend, non-voting, redeemable at $103, none issued Unlimited number of common shares authorized, 550,000 shares issued for $4,840,000 On December 31, 2015, the company had the following balances in other equity accounts $4,675,000 Retained Earnings Accumulated Other Comprehensive Income 344,000 During 2016, the following events occurred 1. 2. 3· 4. 5. On January 2, Eastwood decided to raise more capital and issued 29,000 preferred shares for $100 per share The company declared and paid the dividend on the preferred shares for the first half of the year The company declared and distributed a 5% common stock dividend when the market price or the common shares was $50 per share. In November, the share price of the common shares had risen to $97 per share, so the board of directors voted to split the shares five-for-one. Late in December, the company declared and paid the dividend on the preferred shares for the second half of the year and declared a cash dividend on the common shares of $0.40 per share payable in early January 2016. In past years, the dividend had generally been about $1.60 per share. The company earned a net income of $757,900 for 2015 and reported other comprehensive income or $91,700. 6. Use a spreadsheet or table format like the one in the first practice problem to track all of the changes in the shareholders' equity accounts in 2016. (Ifan amount reduces the account balance then enter with negative sign, e.g. -15,000 or in parenthesis, e.g. (15,000).) Common Shares Shares Shares Earnings comprehensive income Date Shares Total Dec 31, 2015 1. issued preferred shares 2. preferred share dividends 3·5% stock dividend on common shares 4. 5-for-1 stock split, common shares 5.Preferred dividends 5. Common dividends 6. Net income 6. Other omp-rehensive income Dec. 31, 2016 Use the table to prepare the statement of changes in shareholders' equity for 2016. (Ifan amount reduces the account balance then enter with negative sign, e.g. -15,000 or in parenthesis, e.g. (15,000).)

Explanation / Answer

WORKING NOTES:

No. of common shares common shares account $ No. of preferred shares Preferred shares account $ Retained earnings account $ Accum Other comp income $ Total $ 31-Dec-15                 550,000       4,840,000          4,675,000         344,000          9,859,000 Issued pref shares                29,000               2,900,000        (1,375,000)          1,525,000 Pref share dividends                         -   5% stock dividend on common sh                   27,500       1,375,000          1,375,000 5 for 1 stock split, common shares             2,310,000                         -   Preferred dividends            (116,000)           (116,000) Common dividends        (1,155,000)       (1,155,000) Net income              757,900             757,900 Other comp income                91,700                91,700 31-Dec-16             2,887,500       6,215,000                29,000               2,900,000          2,878,600         344,000       12,337,600

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