Reference no: EM133021305
Question - R Company was created on January 1, 2021. The following transactions relating to shareholder's equity occurred during the first two years of the company's operations:
2021
1/1/21 Authorized the issuance of 2,000,000 shares of 5 par value ordinary shares and 100,000 shares of 100 par value preference shares. The preference share pays a 10% annual dividend and is cumulative.
1/1/21 Issued 200,000 ordinary shares for cash at 12 per share.
1/1/21 Issued 100,000 ordinary shares in exchange for a building valued at 820,000 and merchandise inventory valued at 380,000.
1/1/21 Accepted subscription for 150,000 ordinary shares at 12 per share. The subscribers made no down payments, and the full purchase price was due on April 1, 2021.
1/1/21 Paid a cash disbursement to the company's founders for 100,000 for start-up cost.
4/1/21 Collected the full subscription price for the January 1 ordinary shares and issued the stock.
12/31/21 The income summary account for 2021 had a 125,000 credit balance before being closed to retained earnings. No dividends were declared on either the ordinary or preference shares.
2022
1/4/22 Issued 100,000 ordinary shares for cash at 15 per share.
12/10/22 Declared dividends payable on January 10, as follows:
To preference shareholders for 2021 120,000
To preference shareholders for 2022 120,000
To ordinary shareholders for 2022 300,000
12/31/22 The income summary account for 2022 had a 1,000,000 credit balance before being closed to retained earnings.
Required -
a. Prepare the journal entries to record these transactions.
b. Prepare the shareholders' equity section as of December 31, 2021 and December 31, 2022.