Reference no: EM132780985

Ayayai Limited has two classes of shares outstanding: preferred ($4 dividend) and common. At December 31, 2019, the following accounts and balances were included in shareholders' equity:

Preferred shares, 310,000 shares issued (authorized, 1,000,000 shares) $ 2,800,000

Common shares, 1,000,000 shares (authorized, unlimited) 24,000,000

Contributed surplus-preferred 100,000

Contributed surplus-common 1,000,000

Retained earnings 4,500,000

Accumulated other comprehensive income 150,000

The contributed surplus accounts arose from net excess of proceeds over cost on previous cancellations of shares of each respective class. The following transactions affected shareholders' equity during 2020:

1. Jan. 1 Issued 23,000 preferred shares at $23 per share.
2. Feb. 1 Issued 45,000 common shares at $18 per share.
3. June 1 Declared a 2-for-1 stock split (common shares).
4. uly 1 Purchased and retired 23,000 common shares at $13 per share.
5. Dec. 31 Net income is $2,000,000; comprehensive income is $1,950,000.
6. Dec. 31 The preferred dividend is declared, and a common dividend of $0.40 per share is declared.

Problem A. Prepare the statement of changes in shareholders' equity for the company at December 31, 2020. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round intermediate calculations to 2 decimal places, e.g. 52.75 and all other answers to 0 decimal places, e.g. 5,275.)

Problem B. Prepare the shareholders' equity section of the SFP for the company at December 31, 2020.

Problem C. Prepare the journal entry for the repurchase of 23,000 common shares on July 1, 2020

Problem D. Prepare the journal entry for the repurchase of 23,000 common shares assuming instead that the repurchase took place on May 31 at the same repurchase price of $13.

Problem E. What effect will the change in the date have on total shareholders' equity?