Reference no: EM132599603

Question - ABC Corporation had the following shareholders' equity balances at January 1, 2020:

Common shares, unlimited authorized, 400,000 issued - $800,000

Retained earnings - $120,000

Accumulated other comprehensive income - $30,000

The following events occurred in 2020:

Issued 50,000 common shares for $150,000 cash.

Declared and paid cash dividends of $25,000.

Reported net income of $40,000.

Reported other comprehensive income of $10,000.

At the end of the year, the fair market value of common shares was $5/share.

Completed a 2:1 stock-split.

Required -

a) Make statement of changes in equity using the following tabular format.

b) Would your answer to part a) above change if the company paid a stock dividend rather than a cash dividend? Explain.

c) Briefly explain why the shareholders' equity section is important to users of financial statements.

d) Provide your views on the following quote from the President of Medical Ltd, a struggling pharmaceutical company that focuses on developing new and innovative medications.