Reference no: EM132916417
Question - Perfecto Aquariums Inc. (PAI) is an aquarium and aquarium accessory manufacturer, and follows ASPE. PAI was incorporated during 2020 with an unlimited number of common shares, and 50,000 preferred shares with a $3 dividend rate authorized. The following transactions took place during the first year of operations with respect to these shares:
Jan. 15- 30,000 common shares were sold by subscription to three individuals, who each purchased 10,000 shares for $50 per share. The terms require 10% of the balance to be paid in cash immediately. The balance was to be paid by December 30, 2021 at which time the shares will be issued.
Feb. 20- 70,000 common shares were sold by subscription to seven individuals, who each purchased 10,000 shares for $50 per share. The terms require that 10% of the balance be paid in cash immediately, with the balance to be paid by December 30, 2020. Shares are to be issued once the full payment is received.
Mar. 3- 50,000 common shares were sold by an underwriter for $52 per share. The underwriter charged PAI a 5% commission on the sale.
Sept. 23- PAI issued a combination of 1,000 common and 9,480 preferred shares directly (ie: no underwriter) to a new shareholder for a total price of $1,000,000. PAI was unable to estimate a fair value of the preferred shares, and the most recent sale of common shares was used to estimate the value of the common share portion of the transaction.
Dec. 30- Of the seven subscriptions issued on February 20, five subscriptions were paid in full and two subscribers defaulted. According to the subscription contract, the defaulting subscribers would not be issued shares for any amount that had been paid and no cash would be refunded.
Dec. 31- PAI declared a dividend of $200,000 for 2020 to be divided to all shareholders of record on this date. The preferred shares are cumulative and fully participating.
Required -
a) Prepare the journal entries to record the transactions for the year.
b) For the December 31 dividend, how much would each class of shares receive? Show your work in an appropriately organized schedule.