The shareholders\' equity of Deer Ltd. at the end of 2016 and 2015 appeared as f

Question

The shareholders' equity of Deer Ltd. at the end of 2016 and 2015 appeared as follows: Share capital, preferred shares, $2 cumulative, 2,000,000 shares $158,900 $158,900 authorized, 22,700 shares issued Share capital, 5,000,000 common shares authorized, 1,210,000 common shares issued (2015-1,000,000 shares) Retained earnings Total shareholders' equity 5,050,000 4,000,000 3,858,000 3,093,000 $9,066,900 $7,251,900 During 2016, Deer paid a total of $129,700 in cash dividends. Assume the preferred shares were not in arrears at December 31, 2015. How was the $129,700 in cash dividends distributed between the two types of shares in 2016? 2016 $ Assume the preferred share dividends were in arrears for one year; that is, the dividends were not paid in 2015. How was the $129,700 in cash dividends distributed between the two classes of shares? 2015 arrears 2016 Both common shares and retained earnings changed during the year. Provide journal entries that would account for the changes. (Enter debit entries first followed by credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account and explanation Debit Credit 1. (common shares issued during yeer) 2. (Dividends declared during year) 3. (Dividends paid during year) (Net income for the year closed to retained earnings) 5. (Dividends Declared for the year closed to retained earnings)

Explanation / Answer

1) Preferred Common Total 2016 45400 84300 129700 ($2*22700) (129700-45400) 2) Preferred Common Total 2015 arrears 45400 45400 ($2*22700) 2016 45400 38900 ($2*22700) (129700-45400-45400) 90800 38900 3) Account Head & Description Debit Amount Credit Amount 1) Cash (5050000-4000000) 1050000 Common stock 1050000 (common shares issued during the year) 2) Dividends 129700 Dividends payable 129700 (Dividends declared during the year) 3) Dividends payable 129700 Cash 129700 Dividends paid during the year) 4) Income summary (3858000+129700-3093000) 894700 Retained earnings 894700 (net income for the year closed to retained earnings) 5) Retained earnings 129700 Dividends 129700 (Dividends declared for the year closed to retained earnings)

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