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.