How are equity investments measured

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Reference no: EM131976928

Question: Foley Corporation has the following capital structure at the beginning of the year:

Share capital-preference 6%, $50 par value, 20,000 shares authorized,

6,000 shares issued and outstanding $ 300,000

Share capital-ordinary, $10 par value, 60,000 shares authorized,

40,000 shares issued and outstanding 400,000

Share premium-ordinary 110,000

Retained earnings 440,000

Total equity $1,250,000

Instructions: (a) Record the following transactions which occurred consecutively (show all calculations).

1. A total cash dividend of $90,000 was declared and payable to shareholders of record.

Record dividends payable on ordinary and preference shares in separate accounts.

2. A 10% ordinary share dividend was declared. The average fair value of the ordinary shares is $18 a share.

3. Assume that net income for the year was $150,000 (record the closing entry) and the board of directors appropriated $70,000 of retained earnings for plant expansion.

(b) Construct the equity section incorporating all the above information.

Reference no: EM131976928

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