Reference no: EM133179514

Question 1 - Teak Outdoor Furniture Limited included the following shareholders' equity on its year-end balance sheet at February 28, 2020.

Shareholders' Equity Preferred shares, $1.10 cumulative; authorized 100,000 shares in each class

Class A---issued 75,000 shares $1,500,000

Class B---issued 92,000 shares 1,840,000

Common shares: authorized 1,000,000 shares, issued 280,000 shares 6,940,000

Retained earnings 8,330,000

18,610,000

Required -

1. Identify the different issues of shares that Teak Outdoor Furniture Limited has outstanding.

2. Give the summary entries to record issuance of all the Teak shares. Assumes that all the shares were issued for cash. Explanations are not required.

3. Supposed Teak did not pay its preferred dividends for three years. Would the company have to pay those dividends in arrears before paying dividends to the common shareholders? Give your reason.

4. What amount of preferred dividends must Teak declare and pay each year to avoid having preferred dividends in arrears?

5. Assume that preferred dividends are in arrears for 2019. Record the declaration of an $800,000 dividend on February 28, 2020. An explanation is not required.

Question 2 - Cones Inc. of Baie-Comeau completed the following transactions during 2020, the company's tenth year of operations.

Feb. 2 Issued 10,000 common shares for cash of $ 250,000.

Feb. 22 Sold 700 common shares for $ 26 per share.

Aug. 6 Declared a cash dividend on the 10,000 $0.60 preferred shares.

Sept. 1 Paid the cash dividends.

Nov. 18 Declared and distributed a 10% stock dividend on the 30,000 common shares outstanding. The market value of the common shares was $25 per share.

Required - Analyze each transaction in terms of its effect (in dollars) on the accounting equation of Cones Inc.